Morning Breath May 22

Good morning. Happy Tuesday.

The Asian/Pacific markets closed up across the board. Indonesia rallied 2%; Australia, China, Japan, New Zealand, Singapore, South Korea and Taiwan rallied more than 1%. Other than Greece, Europe is currently up across the board. Austria and Belgium are up more than 2%; France, Germany, Norway, Stockholm, Switzerland, London and the Czech Republic are up more than 1%. Futures here in the States point towards an up open for the cash market.
The dollar is up slightly. Oil and copper are up slightly. Gold and silver are down.
So the market bounced yesterday, but I’m not completely sold. The S&P had dropped 6 straight days and 11 out of 13. It’s not hard to bounce when stocks are so beaten down. And volume wasn’t very strong, so we need to respect the downtrend.
This doesn’t mean I’m holding shorts and adding new ones right now. I’m not. It’s important that you know your trading style right now. The intermediate term trend is down. Do you hold short and allow the market to bounce against you, or do you cover shorts and look to re-enter at a future date? I personally cover and look to re-short. The S&P dropped 100 points in a couple weeks and gave us many good short set ups. I see no reason to give profits back. If the market stalls soon and drops soon after, I’ll have to scramble to get back in. That’s just trading. You don’t know what’s going to happen, so you play the odds.
There isn’t much news out today. The lead stories cover include Kodak’s patent loss against Apple and IBM, a strike in Cambodia at a Levi’s/Gap factory and the unequal economic recovery across America. These are interesting stories, but not the typical early-morning, market-moving stories we’ve become accustomed to. Oh and of course there reports about how the Facebook IPO was a big failure, which as you know, I disagree with.
Here’s the 60-min S&P chart. 1340 was support on the way down, so now it’s resistance. That also happens to be the 38.2 retracement of the May sell-off. Whenever you get two different groups of traders eyeing the same level for different reasons, the odds that level is important is heightened. Pay attention to it.www.leavittbrothers.com