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