Thursday, September 3, 2009

SP Update

                            Click on Chart to Enlarge

After getting somewhat oversold, see RSI divergence, it was not a big surprise to see SP's bounce. The surprise is how weak a bounce it's been, not even retracing .382 of the last leg down.
The RSI 's are now back in neutral territory, and the market is NO LONGER oversold. While it can continue to consolidate for a little longer, and perhaps make .382 or even 50%,  there is potential for a -3- of 3 down here,  accelerating through the 975 low.

Below 975 the next major support is derived from fibonacci retracements of the last abc structure up that began from 865. So a 50% retrace of that move  is 950,  .618 is 930. AND there is a support trendline running up from 666 that crosses under around 960. However, if the 1039 high completed a major structure up from 666, as I believe likely, those support points will have less relevance than the fib retracements of the entire move up.  So a 50% retrace of that is 852 for instance, slightly under the 865 low. Lets call the first real support 865/852.
I lean toward  the more volatile sell off scenario based on the possible series of 3 abc structures in the  position of a 2 wave,  the reduction in short interest, worsening volume and typical high bullish sentiment (in this macro environment!). Additionally we are of course entering the Sept/Oct period.

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