S&P 500 - September 3, 2009

charts courtesy of stockcharts.com

So far, the areas that we have picked on the charts have behaved correctly.

We picked an area on the 60-min chart that was based on an intersection of a channel a support area, the rising 89 EMA, and the top of a gap.

Index went sideways around the area discussed above and finally gave the bounce we were expecting.

The purple markers of this 15-min chart also did very well

Also notice the area that I had identified with red. It absorbed the down move twice and gave a short term double bottom, and the anticipated bounce.

What now? Because of the tight action these past two days, it’s a bit unclear if we have all the waves we need for a complete wave set or not. To be safe, I will regard the waves as complete. Meaning that I am going to view the down move as either a wave 1 of the next downtrend. There is a possibility that we are still doing a wave 4. If so, index should soon reverse course and make another nominal low.

There is employment data on Friday at 08:30, so the future markets may become quite interesting to watch

Regardless, our levels remain in place: 1018 to the upside and 990 to the downside.

The down move that started on August 28 has deeply retraced the preceding up move that started August 17, perhaps a bit too deep for a wave 2. I’ll just have that in mind as I observe how the price bounces in here. I will also remember that bulls are still in control, and bears just seem to fail to break the index when it matters.

We may get a pre-holiday, low volume bull fest tomorrow courtesy of mass ETF and Future buyers. If so, Tuesday will most probably tell the story – just thinking out loud, that’s all. Stay focused on the levels

For the day, volume was below average. Breadth was positive.

Bears still need a follow through.

McClellan Oscillator bounced from oversold levels. Bulls will need more than just bounces on low volume.

After 4 days of selling, it is not odd for price to bounce from support (in this case, 990). The fact that the bounce took two days to develop and came on limp volume is a bit worrisome. The broadening pattern, which is not mentioned widely, is still active. So is the Inv. H&S of the whole rally. There is a lot of support on the chat above. One area that is shaping up is north of 975 based on the rising trend line, 990 pivot, and the rising 55 EMA.

My Jury’s still out on Nas100. It’s been a bit weaker than S&P.

There is support around 1550 and then 1515.

Keep an eye on the magenta line, it is the downtrend of our weekly chart

Have a Nice Day!