Somewhat bearish environment -

Today's VIX & PUT/CALL RATIO movement is a sign of over-optimism and is therefore bearish.

Here's what happened so far today:

Initially prices declined from 8880 on the DJIA to 8820 (futures, Sep) and it was difficult to assess the situation - there was put-buying of course, and could be construed as bearish, so when prices advanced to new highs (back to 8900), that implied there is a solid cushion of support under the market at 8820. Prices have waffled from 8850 to 8900 since that time and then broke down to test 8820 late this afternoon.

What I've seen overall is a flat market with VIX falling and a high overall trading volume in puts.

I'm going to hold off on making a market call at this point - other than I'm concerned that a bearish event is setting up where short-term you get "put-selling together with falling prices" and that means a sharp selloff is likely just around the corner. [It is the opposite of when you see "call selling in a price advance", which is bullish, of course. It shows concern that prices will fall and of course, that means prices advance. ]

I may just offer the idea that 8840-8850 can be sold with an 8875 stop - targeting the same on the downside, about 8810-8800 into the close.

Many more earnings announcements are due this week as this is a big EPS release week for the S&P500 consituents.

Tim West 3:38PM EST 8828 YMu9 last

SELL SIGNAL 943.50 ESU9

Sell signal registered at 12:30PM

New high was needed after three hours = weak market

Sell short and use 5 pt stop. Lower stop to breakeven after 1 hour. Trail profit by 5 pts.

Target 5 pts initially.

12:43PM now with ES at 944.00 bid

Another BUY & SELL SIGNAL SETUP - wait until 2:50PM

Heavy put buying in the morning along with the strong down move in the market is a setup for the market to continue moving down today, however, there needs to be a new low made every 3 hours to confirm that sellers have orders to keep pressure on the market.

Strategy 1 - if no new low between now and 2:50PM - then buy and use a stop under the low of the day. If stopped out - go with that new low and go short - stop out using a 3 pt stop and lower that stop down to breakeven after ONLY 15 minutes.

Strategy 2 - if a new low is made between now and 2:50PM, then go with that downtrend and risk 5 pts to make 7 points on the ES. Lower stops to breakeven after 30 minutes.

Tim 2:31PM EST