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Sunday, September 19, 2010
The SPX is sucked right up into the corner on the Fib fan chart caught between over-head trendline resistance of the two previous highs, and the support of the last short-term bullish Fib fan. If the SPX cannot hold this fan line, next support is down in the 1100 area from a longer-term Fib fan. The bears biggest mission should be getting the SPX back down into the blue bearish Fib fans, until then the bulls have the definite edge.
Really interesting how the 200 day Moving Average has been in play the last five months, with multiple points of contact that have caused a short-term reversal. The last two previous attempts that the SPX did recapture the 200 day MA it held as support for a couple of weeks before ultimately failing and a sell-off was the end result. Right now the 200 day is at 1116.16, and if the SPX were to close on a daily basis below this support, the odds jump that a top could be in, as support turns once again back into resistance. Note the over-bought conditions on the RSI, and STO, bulls need to be careful at this time because the indicators suggest a sell-off needs to happen to relieve these conditions which would push the SPX back under the 200 day MA.
Right below the 200 day MA which is at 1116.16 resides an important previous low in Elliott wave terms. 1114.63 is the low point of the 4th wave that should not be violated unless the rally from 1039.70 has been completed in a full five waves up meaning a break below here would confirm a top is in place and the SPX is most likely in a new down trend. If the SPX already has a top in, it would become a very bearish structure with a triple top that would really up the odds we are going into a bear market this fall with a retest of the 1010 lows a very high likelihood. This is now a point in time that could determine the next few months market action, if the bulls get rejected a third time of breaking and holding above the 1131 level with conviction, it will be game over. The opposite can be said if the bulls do over-take the 1131 level where it would become a strong point of support to lead the markets higher. Because of the over-bought conditions, lack of volume and momentum in this current rally I am leaning bearish, with any break below the 1114 level confirming that feeling.