A View from the Swamp - SPX
The parabolic trading channel that developed from the lows of 8/10 was decidedly broken on Friday 8/27. The parabolic LTL is currently at about 1362; while we closed at 1348. The short-term (60 min) TA indicates that this TL will probably be challenged. The success or failure of this challenge will speak volumes. My personal belief and "bet" is that, if the challenge develops, it will fail. However, this is tantamount to talking to the charts. More importantly, an obvious upper Pivot Point of 1362 has been created.
An investor should always have two Pivot Points in mind -- one to the upside and one to the downside. the upper Pivot Point being defined, where is the lower Pivot Point?
While the DJIA has been in very well defined channel since April, the S&P 500 performance has been erratic. For the last 3 months, a DTL from the 5/13 & 6/22 highs has been significant, being used as temporary support on 8/2, and solid support on 8/18. This TL should offer support at about 1300 to 1308.
The weekly chart of SPX is scary! If one draws a TL from the 10/97 low to the late 5/99 to early 7/99 lows, one will be struck by the number of times that this line has operated as both support and resistance. Most importantly, despite the perceived Market performance over the last few weeks, this line was penetrated to the downside the week of 8/6 and has operated as resistance since then.
The attempt this week to pierce this line of resistance failed! Now, I don't pretend to have a crystal ball that tells me where the Market is going. However, if this resistance line continues to fail, we are going to again test the base at around 1280.
This coming week is going to be critical to giving us an understanding of the investment question "Where to from here?" I feel very comfortable at about 76% cash.
the Tidy Bowl dude |
