A rare premarket down futures has everyone confused today.  How can this be allowed? How can it be? It's stunning.

After holding S&P 1170 for most of the morning, the S&P 500 has just slipped below that level. (ironically just as I showed an intraday chart yesterday of how the market went vertical right after S&P 1170 was breached to the upside, we see the EXACT same pattern in reverse today - the minute 1170 was broken, we lost 4 S&P points immediately - still a vertical technical driven move, but in opposite direction)  Normally I'd be selling index positions on that break since that is a failure to hold the breakout level, but I am going to try the methodology I mentioned yesterday and that is to hold on as long as the 5 day moving average holds on a closing basis.  The problem with doing this is, eventually this market is going to reverse and blow people up.  It might be today, or in 10 weeks.  The second problem is while the 5 day moving average rule has worked wonders the past 5-6 weeks there have been a few times that level broke INTRADAY before opportune buy orders came in to save the market.  So one cannot tell at 2 PM (obviously) what will happen at 4 PM.  One of these days the 2 PM tell won't be a false positive as it has been the past 5-6 weeks.

Hence, today is going to be interesting - since the option plays can ruin a portfolio quickly I might not be able to hold them for any serious intraday dip lower than this level, but the levered ETFs I might be willing to allow some more leeway.  Of course the whole idea that I am making even a minor change to my style, points to the complacency that sets in as we all expect a late day rally to make it all better.

The 5 day moving average is roughly 1167- only on 3 occassions have we broken even below this level intraday in this slow motion rally but 2 of those days have been in the past 4 sessions.

Keeping track of our 2 gaps - they still sit there at 1124, and 1078; the latter is now 7.8% below.  That is interesting because the only 3 corrections we've had the past year have been of the 8%ish variety.  Combined with one of the most overbought markets I've ever seen, just something to keep in mind.  That doesn't mean we cannot rally another 5% straight from here; the relentless grind higher deserves the benefit of the doubt as anyone who has stood in it's way has been made the fool ... until the pattern breaks, people will keep repeating it.  It will only be wrong once.