market at pivotal point

7/1

The SPX has been building up on the head and shoulder pattern that goes back to the beginning of the year. The neckline near the 1040-1050 line was broken. We've been moving downwards for nearly two weeks. Volatility levels are almost similar to the crisis time. Unemployment numbers are coming out Friday.

If the numbers are in line with expectations, then it might not be much of a market mover, given that we have gone down so much. The market almost discounted the negative unemployment numbers.

There is uncertainty whether this market will play out the head and shoulder pattern or if this is a false h&s pattern. The blog community seems keen on the h&s pattern playing out, which would put the SPX in the 900 level.

Today's hammer might indicate that we might have a relief rally in the next two weeks. Either way the markets will show it hand tomorrow with the monthly unemployment numbers.

I have a long position in BP. BP has been so battered down recently. I've noticed that BP has been moving inversely with the general markets. On days when the markets were down over 2%, BP has been up over 4%.

The market has periods of trending either up or down for a period with strength.

Today I attended a call hosted by roubini global economics (RGE) on the economy. They don't think that a double dip recession is likely, although growth will be slightly less. This may be exactly what we've seeing with the economic data. Economic growth is slowing, but it won't be negative. This is where I'm conflicted between with my fundamental and technical look of the markets. There are some in the technical camp who believe that we will return to test the March 2009 lows, but the economic may not support it IF the economy doesn't falter. Given all the problems with soverign debt and the state budget problems, I think that we could go back to retest the March lows. However the balance sheets are companies are strong and they don't have a lot of debt.

So conflicted about where the markets will go. I will have to wait and let the market tell me. In the mean time I will wait for direction...