S&P 500 - August 24, 2010

Not a fun day for the bulls!

This a weekly chart


Not a very pretty candle, is it?

As things are now (it may change by the end of the week), weekly candle is threatening to drop into what I consider as negative posture for the index.

We have a clear higher high in place and index is below my MAs. If index does not start a climb soon, my MAs may get negatively aligned as well.

I decided to start the preliminary work of a new line study for the decline from April’s high.

This is what I have


Again, things may change, and I may modify or scrap the new line study (pinkish) – we’ll see how it goes

This is a daily chart


I had already started the preliminary line study of the above as a channel on my daily frame. Here, I adjusted it a bit and changed the color on the daily to pink to be in line with the weekly chart.

OK, enough playing with lines.

Index sort of tested the upper range of our 1041 OEW pivot which is in the neighborhood of lows made in February, May, and June. Notice that the low of the day was made on a purple parallel actionary line (I have marked it with a red arrow). Despite having done line studies for what seems like an eternity, I still get amazed sometimes at how well they perform.

Index is below all my MAs and the MA alignment is getting worse every day. There just doesn’t seem to be any saving grace on the daily chart. There is not much else to say really, the chart looks like a disaster, There must be a lot of trapped buyers at higher levels and all I can do is try and see what level of support may provide a potential resting place.

Daily volume expanded. Daily breadth was poor


S&P’s McClellan group of oscillators deteriorated further


Some other measures of breadth that I follow look very poor


Barring a sudden, all-out deployment of massive amount of money to the bid of the tape, the above chart indicates further downside for the index.

That said, index is oversold. It has been oversold for days now. ARMS registered yet another high number.


It’s like being sold out and yet no buyers – no meaningful bounce. It’s a very dangerous situation in the sense that further inability to mount a bounce or rally to relieve the oversold condition may fetch us sharp, rapid bouts of selling.

I think index needs some sort of catalyst like news or announcement or intervention to startle the shorts into a rush to cover.

This is 60-min chart


We have 4 unfilled gaps on the way down (blue rectangles). RSI seems like it might be setting a 2nd set of divergences. The decline from August 23 looks like a 3-wave affair. Maybe we get another push for another low or retest to complete 5-waves and then we see a bounce? Well, that’s the best I can do for the bulls. Other than that, 60-min technicals look dismal – poorly aligned MAs, price in the lower half of a down-sloping channel, price making lower lows and highs.

Repeating what I said yesterday, this Friday is GDP. If I were a perma bull, I might fantasize about some all-mighty bear trapper (or market rigger) to get them all in on the short side into that number -- for a squeeze

OEW pivot support at 1041 and 1032. Pivot resistance at 1058 and 1090.

Here are some levels of interest

1058-1062 (Weekly VWAP and OEW pivot)

1041 (OEW pivot)

1033 (Weekly VWAP and OEW pivot)

1015-1018 (Daily VWAP and OEW pivot)

996 (Weekly VWAP)

Long term trend is up. Mid-term trend is up (yes, still up, but looking weak). Short term trend is down (a move above 1075 may change that)

Have a Nice Day!