Bias-down target met.

[pay]This morning’s drop is not what the doctor ordered. Actually, it is an alternative treatment strategy. The symptoms were a runaway rally accompanied by relatively light volume and a deep hacking cough. The cough turns out to be related to a recent trip to Guam (long story), but the low-volume rally was more serious and didn’t respond to antibiotics.

Either the three-day holiday seasonal bullishness was going into hyper-drive, or else its effect was inverting. Either the rally was preparing to extend 2-3 dozen points further, or else the evaporating liquidity was going to smack down prices. I found it bullish near-term, i.e. the first of each two choices, that yesterday’s close recovered above prior highs. The morning’s last-minute breakout wasn’t at all endearing, but that wasn’t a deal-killer in a low volume environment.

Well, something was. The late bias-down signal extended to its 1287’50 target was probed by nearly 1 point before bouncing back up to 1289’50. A retest of the low would either hold for the day, or else break lower targeting 1280’00.

The potential drop’s payoff probably merits for most traders entering short on a new low, with a stop back above 1289’00 – perhaps a stop-and-reverse. If the bounce first extends up to 1291’50, then falling back under 1289’50 would simply put into play 1280’00. Closing above 1291’50 would start to be bullish.

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