Trade Update: S&P500

I was unable to watch the market all day, but it looks like we were stooped out of our SPY short position @ 142.5 around 10:30. So we are out of our S&P500 position, the details are listed below.

As I see it the best indicator for the SPY(IVV) is the 8 day EMA. There is a lot of noise beneath this moving average as the market trades in a wide down trend. We will see about shorting the SPY into it's 8 day EMA. However any break above the 8 day EMA will surely result in short covering and a powerful rally. The problem with this kind of situation is that if the short covering occurs unless you have a powerful day trader platform you may never catch the long end of it. Most of the shorts will have their stops at around the same place and this could force an intraday gap as the specialist plays their games. You're much better off to be in already, but if the 8 day EMA is not broken then it's smarts. This is only one reason that I prefer to go long and short on the same market and let my stops sort it out.

So what's next for the SPY? Not sure, but I say more downward pressure for the medium term.

The stochastic is turning up from 20% in the daily chart and that will probably get us back to the 8 day EMA. But after that more meandering down with no end in sight(except "the" bottom). We are approaching the years low 136.75 with less than 400 million shares of daily volume. What will signal a turn around? Well a break of the 8 day EMA is not enough. If the short covering has no follow through it WILL fail as the shorts see the rally lacks staying power and short again(like me). Notice(see link) that the turn around in August occurred with almost 600 million shares most of it buying. That's follow through and that's what it will take for me to enter with more than a 1/4 position. So to wrap up:

If the SPY fails at the 8 day EMA go short.
If the SPY breaks the 8 day EMA on light volume stay out.
If the SPY breaks the 8 day EMA on volume of at LEAST 500 million shares take a 1/4 position with a stop @ the 8 day EMA.

http://bigcharts.marketwatch.com/quickchart/quickchart.asp?

S&P500 Tally:

sold short 25 shrs SPY @ 144.54bought to cover 25 shrs @ 142.5.

Difference=(25)(1.95)=48.75,
sold 25 shrs SPY @ 147.06bought to cover 25 shrs @ 142.5.
Difference=(4.56)(25)=114.

We hedged the short with 50 shares of IVV

bought 50 shares IVV @ 145.35sold 50 shares IVV @ 144.25
Difference=(50)(-1.01)=-50.5.
Net profit = 112.25.have