S&P 500 - January 28, 2010

Another distribution day!

I had thought that we were in for the completion of a first wave down and a bounce. If that was the bounce, it fizzled right away on good volume.

Bulls are not sending very encouraging message in here as they ignore oversold conditions and just stay away from buying

The question is whether we are still sliding down the 1st wave (or wave A), or if that little bounce was the 2nd wave (or wave B)


The recent part of the move down can be counted a number of ways. So, it’s better to focus on the price and see what it does. It has been holding the 1090 pivot. It closed near the low end of it today. It’s at the lower end of the range we had in December (wiping out the entire range run). The force of selling may finally break this pivot and target the next one at 1061. It looks and feels like we are near the end of the first wave, but index has to start making short term higher highs and higher lows.

This area of 1090 pivot has become a very contested area. Not only the 60-min chart has seen the index chopping around, it also corresponds, as we showed yesterday, to the daily 89 EMA and some short term trend lines . This is a current daily chart


It’s not a very pretty situation and needs urgent action to at least stabilize the index around here.

For the day, volume expanded. Breadth was poor.


All these distribution days increase the probability of a climactic volume/breadth down, like a washout event to finish the first down wave. I am not saying it will happen but, as index keeps distributing, more and more formerly happy bulls may get nervous – something to keep in mind.

NDX a really bad day


Another NDX gap that had opened on the way up was filled today. By my count, we have one more hap from the uptrend around 1731-1740.

Notice that we have two gaps on the way down now. It’s like wild-wild-wild west out there at the moment :-)

BTW, NDX has joined S&P and has started a mid-term downtrend

Support for S&P is 1061 and 1041. Resistance 1091 and 1107.

Long term trend is up. Mid-term trend is down. Short term trend is down (a move above 1095 may change that)

Trade Safely!