Failed Bailout means test of December 1st lows.

Futures aren't taking kindly to the failed bailout of the US auto industry. What this means for today is a probable test of the low created by post-Thanksgiving/Monday selloff. For the S&P we are talking around the 820 mark:

One can see from the TICK that short positions are favoured. But the significant bullish divergence in the number of stocks making new lows favours a more meaningful rally similar to that of this summer (where the prior reaction high got knocked out - even if in the end the S&P continued to tumble). The best case scenario here would be a rally all the way back to declining resistance in the 1,200-1,300 range.

It will take baby steps first; look for retest of 820 than rally to 1,000 before a another run at 850 before the final push to and beyond 1,000. I would give this a time scale of 2-6 months.

Lets watch and see what happens...

Dr. Declan Fallon, Senior Market Technician, the free stock alerts, market alerts and stock charts website

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