S&P 500 - June 16, 2009

charts courtesy of stockcharts.com

A second distribution day?

Selling continued today. I expected a bounce. Index managed a limp rise to 928 (identified earlier as a critical level to break), and then sold lower

Another critical level is the area of 910-915. That area held the decline today. Bears need to break this level down, but they may not be able to do it right away. There appears to be a complete (or nearly complete) wave set in place and index should soon attempt a bounce. The quality of that bounce may tell us if we are dealing with a serious correction or not.

Looking at this 60-minute chart

There is weakness in terms of momentum. But there are levels of support that may hold the index and provide a shelf for further advance, or bounces

As I have been writing for many days, the bears of the last drop are of no real significance. And it all depends on whether buyers have decided to sell or not; in other words, whether we have fresh, well capitalized bears to exert downside pressure or not. To garner clues in that regard, I watch for signs of distribution.

For the day, volume expanded. Breadth was poor.



Both yesterday and today can be counted as distribution days.

Notice that McClellan Oscillator is the lowest it has been since the March low. Volume of the decline has been below average, but, so far, it has expanded on further selling.

Technically, all the ingredients of a top are in place, and further downside should ensue. But market is the chef that decides what type of meal to cook and serve, so, one level at a time for now.

Let’s Wrap Up

Index suffered a second distribution day

Index is held by support around 910-915. This level is very important for bears to break, and for bulls not to lose

A move below 910 can shift the technicals of the index to the negative side.

McClellan Oscillator has registered its lowest reading since the March low.

Short term trend is down. Mid-term trend is up. Long term trend is down.

Resistance is 912, 935 (Jan 2009 top), 950 (pierced and lost three times), and 961 pivot (a long term level from 2003). Support is 910, 900, and 875-885 (neckline and base of a W bottom) and the frequently contested 850

Bears do not matter at this point. Market needs new bears with capital and conviction, watch for signs of distribution to see if buyers have turned or not.

I still believe that as June progresses, pressure to join the party may increase on under-invested fund managers. However, with a few more selling days like these, that will become very unlikely.
There are sell signals present on price, momentum and breadth.

This is an option expiration week., all sorts of crooked games may be played byall sorts of crooks.

I leave you with these three charts


Nas100 has been selling on expanding volume. It is now at 1440 support. There are a number of sell signals present. There may be a bounce off support, but it seems like one should evaluate existing Tech positions and make decisions as to what to keep, what to hedge, and what to sell. I still have some QLDs, but they are hedged.


Notice that 21 EMA, which had kept every pullback, has given way. Also notice the broken trend lines and the sell signals. Can it turn and go to new highs? Of course it can? But, right now, it looks weak and ready to roll. Again, a sustained move below 910 is the key in my opinion.


Seems like the buyers of the close have been showing with less frequency these past 3-4 days.