Tues outlook

I realize that right now, ES is up 4 points in the evening trading session at 1043. Nonetheless, I will base this analysis on the SPX instead of ES, since we do not know where ES will open in the morning.

Summary: No matter what happens tomorrow, my outlook remains bearish unless SPX 1075 or 1088 is violated.

This is what I have for now. Perhaps I will update this later, as the ES futures trade on throughout the evening.  And we will have to see what the futures are doing from 8AM--9:15AM on Tues.

Looking at the SPX charts, it is clear that 1042 is an important pivot. Tuesday's action may depend in large part on whether the SPX opens above or below 1042.  If it opens above 1042, then 1042 could act as support, if under, as resistance.  As of the close, 1042 was resistance.

When sessions close the day right at support or resistance, it's difficult to know what will happen the next day. It really does depend on the 1042. So I'm outlining 3 scenarios below. For my POSITION (longer term) shorts, I really don't care which scenario plays out, as long as SPX stays under 1088 (preferably 1075).  For the swing shorts, I'll have to decide whether to exit with a profit and re-enter, or to simply hold longer.

(1) If 1042 holds as R, then SPX would stay in the bullish falling wedge, and fall to 1025/1018 on Tues/Wedn before bouncing up.

(2) If SPX advances to 1052/54 and then stalls there and turns lower, then it would be staying with a narrow downtrend channel and fall to 1025/1018 on Tues/Wedn before bouncing up. Note that both (1) and (2) point to the same downside targets. There is a bullish divergence that could cause this bounce.

(3) If SPX breaks over 1053, then upside targets would be 1061, 1066, and 1074 and then turn down. SPX might not make 1074, it could turn down at 1061, 66, or 74 and still be in a downtrend. 1025/18 would be targets on the downside when it resumes. In this scenario, it's interesting that 1052 was the high for Monday, very close to my 1053 (which is a touch of my downtrend R line). If 1053 is pierced and sustained, a move up to 1061,66 is very likely and I'll have to decide if I want to exit my SPXU position around 1053ish (for a profit) and then attempt to re-enter at 1061, 1066, or 1074.  I'll make that decision Tuesday, depending on what charts look like. There is a bullish divergence that could cause this bounce.

It's interesting to note that SPX is falling from 1101 toward 1025 faster (at a steeper angle) than it's move up from 1026 to 1101. This is seen by comparing the slopes of the trendlines in the chart below. Also, unless the bulls push above the Resistance and break the current downtrend, the chart shows a bearish topping pattern.

* ChristopherStockGuy is not an investment advisory service, nor a registered investment advisor or broker-dealer and does not purport to tell or suggest which securities or currencies customers should buy or sell for themselves. For details, see the post from SATURDAY, AUGUST 15, 2009 titled "Disclaimer".