As I've written a few times now, I don't believe in quadruple bottoms - hence I believe S&P 1040 is destined to break.  After that happens I expect some panic selling and then an oversold bounce.  The problem nowadays on the long side is while the oversold bounces are extremely violent (we tend to get +3% days) they are not leading to lasting positive times.  It's just quick flip trading, useless to building intermediate term positions. 

As this chart shows 1040 has been hit 3 times now and today could be considered the 4th.  This level is important because below 1040 the support gets very iffy for almost 100 S&P points.  Due to the 45 degree angle rally without relent we enjoyed much of 2009, especially post July 09 there is little real support.  I've highlighted 3 support areas that mark what I consider weak support via purple lines below - these indicate in reverse chronological orders low of October 2009, September 2009 and August 2009. 

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If those levels are breached we are talking the highs of June 2009 which are just over S&P 950.  Obviously we are not talking a straight line down and indeed I expect even if this happens for the bears to be blown up here or there with the bipolar market that can follow a 90% down day with a 90% up day.  But indeed, the tables could be turning very quickly in a short amount of time.

This is setting up for a very interesting Friday since expectations are for quite poor employment data after the punked moment delivered to us by Obama and Biden a month ago.  The market is going to be oversold barring a big rally tomorrow or Thursday and expectations are low.  In a perfect world we have a washout in the next day or two (I don't consider today to be a washout) setting up for a potential oversold rally Friday.  But again, these rallies - while vicious - are fleeting until the S&P 500 gets back over the 200 day and 50 day moving averages.

A longer term issue is the 'death cross' - that is the 50 day moving average moving below the 200 day.  We are not that far away (a week or two).  So intermediate term - things are looking quite nasty, even though on any individual day bears can be roasted on an open fire by our traditional premarket magic, followed by a +3% session.  This despite what I think are going to be some stellar earning reports in about 3 weeks by the new masters of the universe - the U.S. multinational corporations.