SP500 Intraday Breaks Rising Power Trend

Jan 12, 2010: 1:01 PM CST

Like a fever that does not seem to go away, the S&P 500 finally a lengthy rising consolidation trendline channel this morning and continues to fall by mid-afternoon.

Let’s take a quick look at the pure price move over the recent weeks and then look at possible levels of support to watch.

Sometimes it can be very helpful to take a pure price view of the market, especially with regard to determining the “behavior” or “characteristics,” such as the recent steeply rising uptrend channel line that began December 21, 2009.

With the exception of the end-of-year sell-off, price has maintained BOTH the upper and lower trend channel line which has been described as the “Great Creeper Market” or “Market Melt-Up” that was characterized by very low volatility ( not many price swings) and movement almost solidly in a singular direction.

What levels are important to watch?

On a pure price basis as seen above (60-min chart in TradeStation), the 1,130 level contains a few spike lows which could hold price.  Otherwise, we have the 1,115 spike low which was probably too sudden to make any future impact on price… though we did have a swing high at this level from the December 16th highs.

Otherwise, the 50% “Bear Market” Fibonacci line still rests at 1,121 which could be a major support level, and if it held, it would argue for even higher prices.  Many traders are still watching 1,121 as a key level that divides a new bull and the old bear market currently.

I had mentioned in yesterday’s update that 1,150 is a critical overhead resistance target, and so far that resistance level IS holding as expected (see full post for description and monthly chart).

Otherwise, we will turn to daily rising exponential moving averages as the next logical downside objectives/targets (support zones):

The 20 day EMA rests at 1,126 currently while the rising 50 day EMA rests at 1,106, and then the 1,100 level will act as a powerful “psychological” support level if price pulls back there.

Any move under 1,100 and especially 1,090 will clue us in to expect a deeper than normal pullback in an uptrend, and could target the prior 1,030 swing low after that.

On a separate observation – which sounds like a broken record – we are seeing a slight negative volume divergence over the last three trading sessions as price has pierced its way to new highs – a classic non-confirmation.

As always, let’s keep informed of these levels and trade accordingly.

Corey Rosenbloom, CMT
Afraid to Trade.com

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

7 Comments

7 Responses to “SP500 Intraday Breaks Rising Power Trend”

  1. pipercolt Says:

    But Corey u need another 4 screens to see all this juxtapostion happening. Can anyone time this thing. I certainly couldn't, i was 2 months early to short this mkt. All of a sudden she gets crushed today. I can't win dude.

  2. terlyn Says:

    I don't see anything spectacular in the TICK. What does that mean?

  3. Corey Rosenbloom, CMT Says:

    No, I don't think it could have been timed accurately because of the duality of risk.

    On the one hand, you had a market rising that HAD to correct at some point in time (aka markets do NOT go straight up forever)

    but on the other hand, you could not really short the market because of the frequent “popped stops” at new highs.

    Best thing to do is go with the trend (up) as long as we remained above the lower trendline and enter short on a breakdown of that trendline… which happened today and once it did, it was a swift move as everyone headed for the exits.

    That was the major risk of remaining long – that at ANY point in time, we could have a 'run for the exits' plunge like we got today.

  4. Corey Rosenbloom, CMT Says:

    Good call, Terry!

    Though price is plunging, the TICK is above the intraday low levels seen on Dec 31 and above the low levels seen in December.

    As of mid-day, the intraday TICK low is -978.

    Not that it's bullish, but it does slightly non-confirm the lows… or at least that we're not seeing surges to new lows in TICK from recent levels.

  5. salman22 Says:

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