S&P 500 - July 28, 2009

some charts courtesy of stockcharts.com

In the morning I made two posts and said that the Sept future charts seemed like it had 5 complete waves and a potential top. At that time, index was dropping in second set of impulsive-looking waves, and I said that it was not clear whether that would be an a-b-c or a 1-2-3.

Well, we now know that it was an a-b-c. We also know that the top of that chart was not taken today and it can still be a top. Unfortunately, I cannot say much more than that. The action today has opened the door to a variety of wave configurations. Here. I have labelled two possibilities on the Sept. Future chart

Very messy and untidy price action. Notice that there is broken trend line that was tested and rejected today. Also, notice that yesterday’s low was taken out today, and we have a potential situation for a short term trend change. All of this may mean nothing when a blast of bids can deploy billions to mop the shorts dry in a few seconds.

Interestingly enough, things look different on an index chart

The cash index looks cleaner, and appears like it is consolidating in a flat base. It’s been a brutal and unforgiving market for bears and complacent shorters. For now, there is not much I can do other than exercise patience and trade if I get a set up. A break below 960-965 may finally set the pullback into motion. A break above 980-985 may force shorterts and momentum players to feed the rally in a frenzy.

This is a 60-minute chart of the index

There really is no need for me to be in that chop zone. Notice how the index bounced back without getting oversold, and this was despite the bad consumer sentiment data. Also notice how widely apart the MAs have become. Contrast that to continuous declining momentum at the top, and you get one heck of a tough market to trade. Well, I don’t know about others, it’s tough for me

For the day, volume was above average. Breadth was neutral.



Daily frame is strong, and has been in overbought territory (measured in RSI) since July 13.

Not much else to say – just waiting and trying to squeeze a trade or two.

Let’s Wrap Up:

Index recovers in choppy fashion from early weakness. Short term momentum shows signs of strain.

Bulls own the market. It is their ball to drop. Bears seem weak (if not dead) and incapable of inflicting lasting damage.

Short term trend is up (we need a new short term low to change that). Mid-term trend is up. Long term trend is down.

Index has gone through several levels of resistance with relative ease. They have all become support.

Resistance is 984, and 990. Support is 961 pivot (a long term level from 2003), 955 (top of the 875-955 range), 935 (Jan 2009 top, July 1 peak), 923-928 (tested multiple times), 910-915, 908 (55 EMA), 875-885 (base of a W bottom) and the frequently contested 850

There are well established intermediate buy signals on daily frames.

I leave you with these charts




Regardless of how we may feel about it, this is a strong chart. There are many levels of support. They should give ample time to secure/trim/liquidate to existing long positions if things get rough.



Yes, there are frames larger than 1 minute as well :-) There are some divergences appearing on the weekly RSI. The rally looks sharp and extended. Price is above the long term area of 950. Notice that weekly volume has steadily declined throughout the rally. I don’t feel like buying anything at this moment. I have calculated some upside targets. Those targets are good in my book as long as index stays above the 950 area.


Getting a bit extended. A pullback to, and recovery from 35 (roughly 1450 NDX) would be a low risk buy. I would not like to hold this too far below 35.

Have a Nice Day!