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Monday, August 23, 2010

Monday after the close wrap-up

The percent of stocks above their 50 day Moving Average continues to decline, now down to 35.60% but still has not reached into over-sold territory at the 30% level. The Summation Index printed another red bar today, and is extending the distance from the previous bar, that is, accelerating to the downside, keeping the longer term trend bearish until it reverses and starts printing black, bullish bars.
The 20 week Moving Average is extremely close to crossing over the 50 week MA, only 62 cents left before all three major Moving Averages are aligned into a long-term bearish position. The last time this happened was right before the crash of '08!!!
If the SPX can take out Fridays low of 1063.91, the next important level from a previous low is at 1056.88, which if gets taken out, clears the way for a big test of this years low at 1010.91. On the top-side, the SPX needs to break above 1100.14 to make a higher high, and change the short-term trend to bullish. First resistance for the major Moving Averages is the 50 day MA at 1088.59, there are no major Averages providing support at this time, all are over-head, and are acting as resistance.
After the close, the SPX spiked up at the open and got in a 50% retrace before drifting lower, closing at the low of the day in a boring day considering it is the Monday after OPEX, which in the past has been a volatile trading day. The waves coming down from the high of the day have a very corrective feel to them and can be counted as a three wave move, which would fit in as a "B" wave, of 2 up, that is why there is a question mark on the 2nd wave label, I am not convinced this 2nd wave is finished up yet. The SPX needs to break solidly below 1063.91 to signal that the 2nd wave is done, until then this could continue as a 2nd wave retrace. There is also that open gap at 1085 the SPX could fill, and still stay with-in a normal retrace of 61%. If the SPX does sell-off, leaving that gap open, that would be another longer-term bearish sign because the bulls could not get enough mojo together to get it filled when they had the chance.
Breadth today was also on the boring side, closing at 1.70:1, decliners. The shorter-term charts are in over-sold conditions, so a bounce tomorrow to finish off that 2nd wave would be expected.

1 comment:

  1. Michael,

    Just wanted to extend some thanks for your charts and analysis. I stumbled upon your site about a month ago. I really enjoy your perspective.