S&P 500 - May 20, 2009

some charts courtesy of stockcharts.com

And they dumped into the close for a second day

Today was a technical reversal day, and market finally saw some decent volume.


But, interestingly enough, breadth was neutral leaning positive


So, I am going to regard it as a pullback until breadth picks up on the down side as well.

There are now a number of intermediate sell signals present on the index. To reverse those, buyers have to hit the tape really hard. But if the close of these two days is any indication, buyers seem not in mood to bid the tape.


Index gapped at the open. Among exciting news to get bull juices boiling hot was a piece that said BAC had raised so many billions in secondary offering, so, BOO-YA, and then it turned into DUMP-It-To-YA.

On a side note, why are all these secondary offerings cause for celebration? Yes, I understand that they may be argued as signs of confidence in the system, but do they not seriously dilute existing common shares and do they not increase the supply available in the market? So, even if the confidence is justified, it will be confidence in something(s) that’s is diluted and should cost less – Aaah , I never understand these things.

Index rushed above the 912 pivot, probably cleared a lot of stops, and then turned around in a hurry and rushed down.

This is a 60-minute chart of the index


Index climbed back inside my former road map channel, and was held by its center line.

It could not hold the 912 pivot, and that should be of concern to the bulls

This is a 15-minute chart


900 area is another level of technical importance. That level has, as I write this, been broken in the future market (cash is front month contract – 2, 3 points)

This is 15-minute chart of June contract


I do not yet see a resolution to my wave count and both bullish and bearish scenarios are still viable.

Bearish case now has a lower level (925 cash) that should not be violated. And as long as that level is held the bearish count above is valid.

Bulls need to retake 900 and 912 for starters. They also need to improve the technical picture significantly, especially on 60-minute and daily frames.

We seem to be having a nice 5-wave move down, and a clean channel in place. There are some positive divergences being built, and this wave set may soon turn. The structure and strength of bounce out of that will be important in telling us which wave count might be in play by the index.

Let’s step back and look at 60-minute frame of June contract as well


There is no room for complacency for either side. Index is still in a range, which is now slightly narrower (875-925), as I have shown on the 60-minute chart of June contract. We are now in the middle of that range.

If I am a day trader, then I need to be aware of every twist and turn.

If I am a swinger, then I try to initiate positions near one boundary of the range, and aim for the other.

Nas100 just couldn’t keep it up


See how it’s hanging to the underside of the broken trend line. It still has the support of its short term MAs and 1275 area should provide aver solid floor for a bounce if things get nasty, but before that, tech bears need to take the index below its shorter term MAs.

Watch the Stochastics around 50 as a gauge for short term strength

To wrap up:

S&P is in the middle of a range (875-925), and has kept both bullish and bearish scenarios alive

Bulls need to recapture and hold the 912 area

Bears do not seem to matter much these days; it is a buyers’ game and a questions of when some of them turn into avid sellers

Short term trend is down (it’s been swinging violently these days). Mid-term trend is up. Long term trend is down

Resistance is 900, 912 (pivot), 920, and 935 (Jan 2009 top). Support is 880-885 neckline, 875 (a short term double bottom bounce) and the frequently contested 850

I leave you with this chart


This is not a broken index – Not Yet! Remember that next time you find youself overwhelmed by screams of this perma creature or that. There is support from short term MAs and a strong shelf around 875-880.

Once again, bears are of no significance for the short term, no matter what macro economic chart or number they present; for the index to drop and break, it is the buyers that should turn and sell - watch for signs of distribution.

Have a nice day!