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Monday, August 30, 2010

Monday after the close updates

The Summation Index is back to printing red bars in an accelerated manner, bearish. The long-term trendline from 666 has become very solid resistance and with numerous attempts the SPX has failed to break-thru. It has been a recurring theme for the last year and a half that once the trendline of support gives way, it becomes resistance, and once the back-test fails, the SPX goes into another sell-off. Long-term, if the bulls can-not get above this resistance, things turn decisively more bearish.

The SPX did respect the channel(thin green line) today keeping the bearish count alive, next spot for support, and to confirm the short-term trend remains bearish would be a break below 1039.70, and on the top-side, first resistance would be the thin green channel line followed by the previous high of 1081.58 for the short-term trend, and the thick green channel line and the old high of 1129.24 for the longer-term trend. A break below 1039.70 would open the doors for a test of the 1010 lows, and a break above the 1129 level opens the doors for 1173.57. The closest resistance in the basic Moving Averages is the 50 day up at 1082.89. There are none for support!!! After the close, The SPX sold-off in a series of stair-steps that headed lower all day. It is tough to put a decent impulsive count on the squiggles because of all the over-lapping waves so I put up an optional "D" wave of 4 count until it this sell-off sorts itself out. It is possible to count an Leading Diagonal 1-2, 1-2 down count on this sell-off but the SPX would need to really follow-thru tomorrow with a 3rd wave down that would challenge the lows of 1039. The other reason I am suspicious of this sell-off is because the Breadth was only at 3.43:1, decliners at the close, OK breadth but it was a mixed bag, 92.25% of the total volume was sell volume, but the over-all volume was extremely low. This week is likely to continue with the low volume numbers leading into Labor day and that always plays havoc with the counts and the short-term trend.

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