I often mention zones because I don't always expect price to achieve a perfect hit. It can and does happen, but it doesn't have to. There is art and there is science. I'd much rather cultivate art.
Some would rather build complex models that seek to trade the markets like a machine when markets are simply outward psychological expressions of our inner moods.
Leave science for the lab coats. Trading is more about psychology.
Today's psychology will most likely be centered on fear. Large players will notice several things: markets are down hard after hitting the 200-day moving average, good numbers from China, a rally across Asia, margin hikes on Italian debt, and widening French bund spreads.
I don't care that the latest hook is that "portfolio managers are keeping a bid under the market because they are chasing performance." The market is infinitely larger than a group of PMs who got short at the October lows and very long this week and last week. When their minds adjust to the prospect of losing assets rather than simply under performing relative to an index, they will sell en masse.
To this point, take note of the VIX. There is plenty of room for fear to manifest until it becomes extreme.
Targets now are Monday's 1240.75 low, the 50-day MA at 1220, and the 11/1/11 low of 1215.42.
What if I'm wrong? What if the S&P traces out a huge triangle at these levels? There is a spot up around 1343 that is made up of several opens and closes that coincides with a 61.8% measured move from what would likely be the widest part of the triangle. Just throwing it out there. For the time being though, my money is on red.
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