Our S&P bullish view was not confirmed last Wednesday as fear of ending QE pushed prices lower in a mini crash. TRADING2DAY members saw me close all long positions at 1645 as it was clear at that time that there was no buying power to decisively break above the 1650 resistance. Selling pressures increased after Bernanke’s speech and S&P started breaking one support level after the other. Prices eventually yesterday broke below June’s low at 1598 and closed the index 10 points lower. We mentioned in a previous post that 1598 was an intermediate term support. This means that the downward correction that started from 1687, may not be impulsive, but as it proved it is a correction of a higher degree. In other words, the correction is expected to go deeper still. 1655 is now an important intermediate term resistance and pivotal point. The inability of the market to break above that level, makes us believe that prices are now heading towards 1550-40 in the intermediate term.
Connecting wave 1 and wave 3 tops, and moving the parallel line at the bottom of wave 2, gives us the target for wave 4. 1550-40 is that target. For this to be achieved it is going to take a couple of weeks at least. In the short-term, the first leg down from 1650 we believe has ended at 1588 and we expect a corrective bounce.
I expect prices to reach at least the 38% retracement. It is also text-book expected for this bounce to reach 61.8% at 1628. Important resistance level is now the 1650-55 area. Breaking above that level will give us 1700-30 target. For more help trading this index don’t hesitate to contact us.
Disclosure: None of the information or opinions expressed in this blog constitutes a solicitation for the purchase or sale of any security or other instrument. Nothing in this article constitutes investment advice and any recommendations that may be contained herein have not been based upon a consideration of the investment objectives, financial situation or particular needs of any specific recipient. Any purchase or sale activity in any securities or other instrument should be based upon your own analysis and conclusions.
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