Thursday Evening  19 August 2010

 One of the biggest surprises was the complete breakdown in price, last week.  We circled the activity on
the daily chart.  From all of the evidence of developing market activity, it almost looked like a certainty
that price would at the least make a probe higher.  It was not an easy trading area, for we got clipped
twice getting short and then stopped out.  We have since made it back, after last Wednesday's break,
and it is that same break that confirms price is headed lower in the weeks/months to come.

 After being short from last week and taking profits on the position, we were on the sidelines, waiting
for a sign of weakness to reestablish another short position.  That opportunity came on Wednesday,
when price failed at a "double top," of sorts, making a key reversal.  That was described in an article
from this morning, [See S & P - Working The Market, click on http://bit.ly/cbfT9W] where there was an
indication of weakness and a reason to sell, immediately.

 Because of the existing trading range, half the short position was covered near the bottom of the range,
for money management purposes.  While it is apparent that the larger range bars, accompanied by
volume, are to the downside, each sell-off has been followed by a "come-back" rally.  That prompts a
cautious respect for what may happen at any given time.

 The small horizontal line, just under last week's low, indicates support at that low, 1066.25, and it is also
the area of 50% of the range from the 1002 low and 1128 high, around 1063.  We often say, "Anything
can happen," and surprises often happen, so if there is a break of the 1066 area, with a wide range down
and on increased volume, expect more ease of movement downside.

 On the other hand, given the odd character of the market's ability to make surprise rallies, from the mat,
so to speak, lately, an unchanged to lower opening, followed by a rally instead of continuation down,
would not be unexpected.  After all, there are two potential reasons for support down here, the previous
1066 mentioned and the 50% level.

 Tomorrow is the end of the week, and it will be interesting to see where the weekly close is painted on
the chart.  The direction is clearer, but the journey down is not...at least not for now.

 Committed to the short side.