The S&P 500 looked rather strong during the day initially on Tuesday, breaking well above the 2700 level, but rolled over and ended up forming a horrible looking candle. Because of this, I suspect that we are going to drift lower again tomorrow, perhaps trying to reach down to the 2600 level. There is a lot of damage done to this market, and I am a bit concerned about the lack of volume during the day. The question now becomes whether we are breaking down again, or are we trying to form some type of base from which to grow? If you are not involved in the S&P 500, it’s not a bad idea to stay away and let a few more candles form on the daily chart.
The NASDAQ 100 initially tried to rally as well, but then rolled over to form a negative candle. There is a lot of noise in this general vicinity, and I think the market is trying to circulate around the 6500 level in general. I think that the NASDAQ 100 is probably going to struggle based on the extreme lack of volume in the market, with the 6300-level underneath offering a significant floor. If we break down below the 6200 level, it’s very likely that we will suddenly find ourselves in a downtrend. Much like the S&P 500, I think you probably need to sit on the sidelines and wait for the answer to the same question over here, are we basing? It’s a bit difficult to tell right now, but it looks based upon the close during the day on Tuesday that things could get painful for those who are too quick to jump in with their trading capital.