Thursday Evening  8 July 2010

 A long position was taken at 1034 on the intra day upside break out on
Wednesday.  Half the position was liquidated at 1054 near the last half hour of
trade on the same day.  Our initial target was 1067, [See S & P – Targets,
click on http://bit/ly/bk6bu2.]  The high was 1067.

 We opted to stand aside, exiting the second half position at 1064.50, on
Thursday.  Once the objective was reached, it was clear from the lessened volume
that the current counter-trend rally was short-covering and a lack of demand. 
There is no reason, as a matter of course, to maintain a position that has
questionable signs of strength, or lack of, when going against the primary trend.

 It is also apparent from the daily chart the rally to 1067 was a narrow range bar
The narrow range is an indication that buyers were not strong enough to extend
the range higher, and that backs up the assessment above.

 Interestingly, once price sold off from the initial resistance, the reaction was
limited to the downside, and volume did not pick up.  This tells us that sellers
were absent, as well.  As long as sellers are not present to  push price lower, the
rally will hold, and it did.  Still, the character is weak, and the weakness flies in
the face of a down trend.

 If selling enters and volume picks up as price declines, it would be a shorting
opportunity to sell against the half-way retracement.  Watching how present tense
market activity develops on Friday may provide a clue.  If price holds and the
range is small, it will be a negative indication for longs and an invitation for
sellers to eventually enter and resume the downward momentum.

 Price could have a retracement back to the 1055 area, and if it holds, the rally
may have a new life.  This area is reaching a critical stage, for if price cannot hold
and strong selling comes in, the next wave down can be more of the same caliber
of weakness seen since the April high. 

 Caveat Emptor!

S&P D 8 Jul 10