Back on the Line

It's not in the way that you hold me
It's not in the way you say you care
--Toto

Back to fish or cut bait time for the SPX. After today's move lower the index is sitting on the uptrend line (drawn with a crayon rather than with a fine point) defined by last November's lows.

Shorts have to be skittish due to the possibility that at least temporary budget agreement is reached in Washington. Bulls likely continue to expect such an agreement in Pavlovian, moral hazard fashion. That bulls maintain hope and bears lack the stomach for much commitment seems bearish on the margin. Moreover, daily stochastics are just now inching into oversold territory, but nowhere near levels suggesting deeply oversold conditions.

In summary, this is where we've bounced several times in the past few months. Would think the bulls will try to once again extend the pattern. On the other hand, there is technical 'room' lower if the uptrend line is pierced with authority.

position in SPX