Sometimes it can be very helpful to pull off all the indicators on the chart and look at a pure price chart in order to gain a perspective of what price levels hold the most significance at the moment.

That’s what this post is – a price purism look at the three major US Equity Indexes in terms of what closing price level, along with what “spike” price level, you should memorize for a reference going forward.

Let’s start first with the Dow Jones:

The goal of price purism charts is to figure out very quickly what levels leap off the chart at you as significant.

For the Dow Jones, there’s a clear level – logically – at the psychologically important “Dow 10,000.”

Price has managed to close and bounce off of that level twice since May, falling under it only twice.  Not even the recent downturn was able to close the index under 10,000 – yet.

Under the ‘psychological’ level, we have a secondary level at 9,800.  Twice, the index ’spiked’ down to that level and bounced off of it.

The one exception we’ll find to the support levels in all cases is the July lows – which broke the key support levels in a vicious bear trap.

For now, keep focused on the 10,000 level and then under that the 9,800 level in the Dow… and of course anything under 9,600 would push the index down to a fresh new 2010 low.

Next is chart-wise similar S& 500:

To me, the levels in the S&P 500 are clearer.

We have a clean level of closing support at the 1,050 level and then a second “spike low” level at 1,040 – that’s easy to memorize.

Buyers have swooped in to support the market at both the 1,050 and then the ‘none shall pass’ level at 1,040 – again with the exception of the bear trap from July’s low.

The NASDAQ is a little different in terms of closing and spike levels – as we see from its daily chart:

The NASDAQ really doesn’t have a spike low fire-wall like the Dow Jones and S&P 500 have – and the key level to watch in the NASDAQ is 2,150.

What’s interesting is that the NASDAQ – often seen as a leader for the S&P 500 and Dow Jones (meaning what the NASDAQ does first, the others do later) – has broken the key closing support level at 2,150 and moved closer to testing the July – and subsequently 2010 – low at the 2,070 level.

Buyers and bulls need to get this index back above 2,150 quickly if they want to hold the market up here and prevent a potential swift decline.

And that’s the overall thesis we have right now -

First, watch all these key closing and spike low price reference levels for potential support.

If buyers/bulls are unable to keep the indexes above the key support levels – and then above the respective July ‘bear trap’ lows, then we could see a very sharp, quick sell-off as buyers throw in the towel on this market.

They have a chance as long as the index remains above these support levels – but their chances fade dramatically on a break to fresh 2010 – and subsequently fresh 52-week lows.

That will get a lot of media attention that could create further selling which will drive prices even lower.

For now – watch these levels as the key to the future.

Corey Rosenbloom, CMT
Afraid to Trade.com

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