Investors are tired, exhausted and frustrated seeing the market tanking for this long time without any bright light at the end of the tunnel. Therefore they are literally buying any news and today is a great example of them trying to convince themselves that we are out of the forest and we will be growing or being at least neutral. Everybody fears recession and everybody wishes to avoid it.

But look at the chart. The market is clearly in defensive mode although Euro-commissars are claiming to find a way to get out of the debt crisis.

The first news which came out today morning was a creation of a special fund and the existing fund supposed to save the Eurozone will be backed up by more money poured in it. Markets in western Europe climbed up. But Spain denied such measure and all hopes were wrecked again. The markets eased their optimism.

The impulse for this rally were news released by CNBC that the special fund will be created by European Investment Bank and funded by European Financial Stability Facility (EFSF). The fund would be buying problematic bonds from troubled countries and issuing its own bonds serving as collateral for ECB. However, no one yet confirmed this plan or news and some other politicians consider this plan as bizarre.

Well, at least, even though this news was not confirmed and sounds unrealistic, it was enough to push markets up high.

When you take a look at current SPY chart, you will see that the market gapped up. At this point, at 12:30 MDT it is up at $119.33, but on a very low volume. The Bollinger bands are very tight today, so the market is poised for a move, spike, breakout. It doesn’t say which direction, but it says it will happen.

The market broke the pennant resistance as I spoke about yesterday and this morning, but on very low volume and it hit a downtrend channel resistance line. Also the gap was very large and on volume (once again).

When looking at today’s chart, overall trend, lower highs, fantasy news pushing the market up, I think this market will go down either tomorrow or on Wednesday. Therefore I decided to wait until the last ten minutes of today’s trading and then buy puts on SPY. I will wait where the market will most likely close today and make my decision based on this.

Happy trading!