Bears having another shot

Very bearish day with a bearish closing, no less than 27 points on SPX but the big question is: is it going to be for real this time? Three weeks ago market plunged on Egypt news but recovered as soon as Mubarack gave up its power. This time seems to be a little bit more serious, Libya has a pretty big oil reserve so the impact to World market is bigger and Gaddafi it's a different kind of dictator that is not going to resign without a fight. I don't think he has any chance to remain in power but it may take a while until we are going to see the winner. The thing is there is no bad news coming from the economy at this point (some of you may argue against this) so the only reason market plunged today is Libya riots and an overbought market. I say this because most likely as soon as the Libya affair it's over we may see market jumping up again. Unless, of course, other Middle Eastern regime is going to be in trouble.

Let's leave politics aside and try to see what market is trying to tell us. You probably noticed that SPX slipped a little bit bellow SMA 120 on hourly chart and EMAs are almost ready to cross (and they will do cross tomorrow). However, let's not forget the January 28th plunge when we got a bearish EMAs crossing but we've got a bullish crossing next day (granted the day EMAs crossed market was already above SMA 120). I think this happened due to the same scenario, market had no reason to plunge except being overbought on short term and the only reason moved down was because of Egypt. As soon as Egypt crisis was over market rallied back to 1,300 and gained another 40 points after that.

Some people may point out another issue, that market is rallying since September gaining an amazing 300 points in between and without any significant correction except that couple of weeks in November. Looking back in the last 10 years I hardly see any rally as powerful as this one. So a correction may be due with or without Middle East turmoil but definitely the Libyan crisis is the catalyst (or the best excuse to take profit).  

Dollar moved 0.27% up today which, of course, didn't help stocks (they like a weak dollar) but didn't pushed precious metals down at least on US market, that was closed yesterday. On European markets gold and silver was higher than Friday but lower than yesterday.