World markets took a nasty hit yesterday due to news out of Dubai, and Europe down more than 3% on indexes across the board. Dow futures are down -243 at the moment (11 PM CST), and SPX down -32 at 1,077. 1,069 will be the number to watch tomorrow on the $SPX and I am expecting a big gap down across all sectors. I don't think the US will be able to escape this global sell off, as many US companies are involved with investors from Dubai. Tomorrow morning could be ugly as many will jump for the exit.
So will this be a buy opportunity or is this a signal to sell? The market is currently still above major support levels and moving averages are showing a strong uptrend, so it'll be important to look at a couple of indicators tomorrow-
1. Volume - If greater than previous trading days even on a shortened day, extremely negative.
2. Closing price on SPX - 1,069 must hold.
Do not try to second guess where the markets will go based on what you know about Dubai, because you really know nothing. The global financial systems are more complicated than you and I can ever imagine. Follow the trend, and make decisions based on what it's telling you.
Do not automatically assume that the gap will be filled - it may, but the time variable is unknown - it could take 3 years. Your portfolio would be wiped out by then.
A couple months ago for one of my very first posts, I drew out the fibonacci retracement of ~1576 high to 666 low, and the 50% mark was right at 1121. The SPX's recent high is only about 10 points off, and if the market is going to turn, now would be the time.
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