Midweek SP500 Update for July 7 Favors Retracement

Jul 7, 2010: 10:35 AM CST

Let’s take a look at the S&P 500 daily chart to see what levels to watch and what to expect going forward in terms of opportunities in the price structure.

S&P 500 Daily:

We see the market in a highly probable bounce off the 1,010 level as I wrote last week in the post “Hidden Fibonacci Confluence Support.”

I’ve also been posting in the evening in-depth updates to Idealized Trades members that intraday higher timeframe charts have been showing clear positive momentum divergences as well as strong breadth divergences on the test of 1,010.

We are now seeing the expected bounce materialize.

The question now is “How far will the bounce go?”

We have already hit – twice now – the expected overhead short-term price target at 1,040, so that is no longer in play for an upside target.

The 1,040/1,050 level remains ‘token’ resistance within the context of the upswing, but we could certainly see price rally further to test the underside of the falling 20 day EMA at the 1,065 level.

Using simple charting, we would expect to see 1,065 if buyers can trigger a wave of “Popped Stops” (from nervous bears) on a clean break above 1,045.

Keep in mind that 1,044 is a Gann Squares price level to watch.  The Gann level above 1,044 is 1,077 which is between the 20 and 50 day EMAs.

Nothing will change the trend structure of lower lows and lower highs except an unexpectedly powerful bullish rally that breaks above the most recent swing high at 1,130 – that is the only outcome that would challenge the current downtrend structure.  A break above 1,050 will not change the structure.

Keep watching these levels as the market rally materializes on the daily chart, and be on alert for any intraday divergences or signs of reversal ahead of these targets.

Corey Rosenbloom, CMT
Afraid to Trade.com

Follow Corey on Twitter:  http://twitter.com/afraidtotrade

4 Comments

4 Responses to “Midweek SP500 Update for July 7 Favors Retracement”

  1. Michelle B Says:

    There are multiple negative divergences between TICK and SPX intra today.

  2. Corey Rosenbloom, CMT Says:

    Doesn't appear to be stopping the popped stops trend day in place.

  3. Michelle B Says:

    TICK staying strong all day meant that it would be a strong uptrending day thanks to those popped stops. But still, there were multiple negative divergences between TICK and price all day. We'll see if that is indicating anything bearish.

  4. mikesmith53 Says:

    Corey. On your daily SPX chart I see that you use 3,10,16 settings for your MACD. If you were going to use a stochastic complement with that, which stochastic would you use and at what settings? Thanks. Mike