I'm not comfortable going long here, or short... yet. We are stuck in the middle between solid support at 998-1000, and huge resistance at 1100-1108. Don't let this sheep be you! Unless you like to gamble, I'd wait until the direction is clearer.
Wednesday, the Fed's comments should move the market, as it's not going to stay here at 1040 area forever. So, the question is... which way? We are clearly oversold, but we are also forming a bearish pattern. My gut tells me that a small rally will occur to sucker in all the retail bulls. It should fall just short of key resistance levels to prevent the bears from jumping on and profiting.
You know those market makers like to steal money from both bulls and bears. So, expect a lot of fake moves. The trend is down, and no decent rally will occur at this level. It needs to hit the larger support at 998-1000 before I'd feel comfortable going long. Even then, it's still only for a few days, and the selling will continue after that rally ends.
So, I'm looking at Scenario Three to play out at this point. A smaller rally to 105-106 is all I can see right now. I'd hope'd for 107.30-107.60, but it's not looking too bullish right now. With Warren Buffett buying Burlington Northern, which caused that stock to trade up about $25.00 to just under $100.00. That, and the dollar falling should have moved the market higher today.
But, it barely moved up. That's very bearish, as the market would have been up 100 points (Dow) or more in the past with that kind of news. That makes me think that any small negative news will cause more selling. Be cautious here, until a direction is found. Personally, I'm waiting a little longer.