Revisiting the Make or Break Triangle in the SP500

May 16, 2011: 10:09 AM CST

I’ve been writing about the critical “Make-or-Break” area in the S&P 500 near the 1,340 level, and that is exactly where we start the new week.

Let’s take a focused look at this key level and set-up target expectations depending on whether the support level holds or breaks.

The 1,340 key pivot is important because it represents price swing highs from February and April 2011 as shown with the horizontal trendline.

The 20d EMA (green) also rests at 1,341, making it a natural focal point.

Immediately under 1,340 are two key factors to watch, with the first being the rising trendline as drawn which connects three price swing lows as drawn, and then the second factor being the flattening 50d EMA (blue) at 1,327.

In other words, we have a simple chart cluster of indicator/price support between 1,330 and 1,340 which I’ve highlighted above.

So what are the implications given this current level?

A)  IF Buyers hold this critical “make or break” support level, then we would expect the dominant uptrend in place to continue, allowing for a minimum target of a retest of the 1,370 high or a breakthrough to a new recovery high that sets a higher target to 1,400 then 1,440.

B)  IF Sellers bust price down through the 1,330 support, then expect a retest of the 1,300 “Round Number” key level as the next likely move.  Any firm move under 1,300 severely threatens the uptrend in place, which would suggest we would see 1,250 retested.

I just wanted to do a quick update to call your attention to the critical importance of this level that traders are referencing as the short-term dividing line between buyers and sellers in the broader market, and the expectations depending on what actually happens here in the week ahead.

Corey Rosenbloom, CMT
Afraid to Trade.com

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