In my last I said that even though the monthly chart had an underlying bullish “hint” to it we were still operating within a down trend (bearish mode) and the technical “sell” signal that was generated at the close of November 2007. The bullish “hint” was due to the fact we are now at chart support while the technicals are firming. Today let’s drop down one time frame to the weekly chart.
Price made a price fractal low (blue diamond symbol) and Change in Trend (green ellipse) two weeks ago along with a technical “buy” symbol in the RSI. Note that these events occurred at Monthly chart support. However, we also know that the trend is down as measured by D-Mark Wave Analysis and shown in previous posts. Additionally notice where the RSI sat when it flashed its “buy” signal: below 40; which is bear market territory for this indicator. In fact, all of the indicator bottoms this year have been below 40. This tells us to view the current bounce as only a bear market rally and not to get overly excited about “potential” on the monthly chart.
Making a bottom is a process and making low within a support area is just the first step. Before getting too bullish on a longer term basis I next want to see price (basis the weekly chart) rally the RSI above the 40 area and then hold that level on a pullback. Finally, I then want to see the current resistance line (bold, dark red down sloping line on the price chart) broken.
Now back to the daily chart. The cash S&P500 made a downtrending bar on Friday on lower volume. The closing price was coincident with the short moving average which is trying to “contain” (not necessarily stop on a dime) the pullback. If we can hold here then we have been watching a “head fake” to the downside and will continue the rally from the July 15 low. Failure to find support here could lead to a deeper decline and a retest of the July 28 low.
Today’s support levels are: 1253-57; 1245-46; 1240-41; and 1234-36. Below that and we are looking at a retest of the July 15 low. The Wilder stop on any open long position off of the July low is now at 1244.79 (within the second support level mentioned).
Price made a price fractal low (blue diamond symbol) and Change in Trend (green ellipse) two weeks ago along with a technical “buy” symbol in the RSI. Note that these events occurred at Monthly chart support. However, we also know that the trend is down as measured by D-Mark Wave Analysis and shown in previous posts. Additionally notice where the RSI sat when it flashed its “buy” signal: below 40; which is bear market territory for this indicator. In fact, all of the indicator bottoms this year have been below 40. This tells us to view the current bounce as only a bear market rally and not to get overly excited about “potential” on the monthly chart.
Making a bottom is a process and making low within a support area is just the first step. Before getting too bullish on a longer term basis I next want to see price (basis the weekly chart) rally the RSI above the 40 area and then hold that level on a pullback. Finally, I then want to see the current resistance line (bold, dark red down sloping line on the price chart) broken.
Now back to the daily chart. The cash S&P500 made a downtrending bar on Friday on lower volume. The closing price was coincident with the short moving average which is trying to “contain” (not necessarily stop on a dime) the pullback. If we can hold here then we have been watching a “head fake” to the downside and will continue the rally from the July 15 low. Failure to find support here could lead to a deeper decline and a retest of the July 28 low.
Today’s support levels are: 1253-57; 1245-46; 1240-41; and 1234-36. Below that and we are looking at a retest of the July 15 low. The Wilder stop on any open long position off of the July low is now at 1244.79 (within the second support level mentioned).
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