In Search of Capitulation

The 1123 level on the S&P 500 has been very, very good to us, especially as an entry point for last week's 55-handle rip from the long side. In yesterday's piece I explained why I would not reload my long S&P 500 trade at that level, due to a series of higher lows, a series of failed intraday rally attempts, and the index's failure to break above its 50-day moving average. It's a good thing, too, because yesterday the S&P 500 closed beneath 1100 for the first time this year.

At this point there is really no justification for bullishness, as nearly everyone who has gone long the index in the past year (and is still holding the trade) is underwater right now. In fact, I'll be looking to short the index off of that same 1123 level if we reach it today. The fact that I made money from the long side last week means nothing to me now; I guess you could say that when it comes to trading, I'm not a very sentimental guy....333 more words left in this article. To read them, just click below and try Real Money FREE for 14 days.

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