S&P 500, NDX - October 20, 2010

That certainly was a strong bounce.

I did expect a bounce, but not with this much strength

We all know Fed is monetizing a few billions here and a few billions there. We also know what Bernanke has said:

“First, the FOMC will strongly resist deviations from price stability in the downward direction.”

So, we know what the macro backdrop of the financial markets is, or what the Fed wants it to be. Macro can run all over technicals sooner than you can load a chart let alone draw a trend line.

Keeping the fundamental assertion of Mr. Bernanke in mind, let’s look at the technicals.


When the weekly chart finally got above the blue actionary line, I mentioned that index was approaching an 1175-1200 resistance band. So far, index has managed to stay close to resistance. Weekly RSI is overbought but that does not mean it cannot be pushed more overbought.

There is support from the 2007-2010 downtrend line, and after that, support from 1150 area

This is daily


So far the 13 EMA has provided support. We seem to have a MACD cross. I am just mentioning it without trying to read too much into it.

As long as index stays above the 2007-2010 downtrend, it’s either advancing or consolidating

Daily volume shrank. Daily breadth was good


McClellans turned up but are still downtrending


If uptrend is about to resume, I would like to see an expansion of the oscillators

This is a 60-min chart


Index moved into the gap it opened down yesterday but could not overcome it. A move below 1170 may indicate that the correction is back on agenda. As long as index stays above 1170, it can keep the current trend from Aug-Sep low alive and try for a new high

The large bounce today opens the door for a other possibilities for smaller waves, like this



The 1170 area is a key level for now.

USD dropped back into the lower half of its down channel


That was an ugly candle today. Much too much rides on dollar’s weakness – keep an eye on the Bucky!

OEW pivot support at 1176 and 1168. Pivot resistance at 1187 and 1219.

Long term trend is up. Mid-term trend is up. Short term trend is up (a move below 1170 can change that).

Have a Nice Day!