The SP500 Dow Jones and the Critical 50 day EMA

Mar 10, 2011: 11:24 AM CST

Traders across the world are watching critical chart levels in the US Equity Indexes very closely… so let’s take a look at these reference levels closely.

The S&P 500 and the 50d EMA:

In uptrending moves like these, we look to moving averages to provide support and set-up buy-in trades via retracements as price bounces up off rising EMAs.

Such was the case in November during the little sideways market correction that took price into a triple-bottom formation that resulted in a surge/breakout to the upside and continuation of the trend.

Had the market broken this 50d EMA at this point – pulsing under 1,180 – it would have changed the psychology of the market in that the market “lost” the support of the 50d EMA… but that wasn’t the case.

We’re now facing a similar “Will it Break or Will it Hold?” situation wherein we have a mini-three push into the critical 1,300 chart support level which – as of this writing – has held support.

Right now, the S&P 500 tested the 50d EMA at the 1,296 level and – again so far – has held critical support.

A breakdown under this level opens the pathway to test the January swing low near 1,275 so that would be the downside expected play.

A push under the 1,275 swing low opens the door to a feedback loop to the downside, wherein some buyers would be forced to liquidate (sell) and embattled short-sellers may try to put on new short-sell positions – both leading to downward pressure on price from a technical standpoint.

Anyway – the main idea is to watch three key chart points for structure:

The 50d EMA at 1,296
The “Round Number” Support at 1,300
The January Swing Low at 1,275

The picture – not surprisingly – is identical in the Dow Jones:

Without all the discussion above (what happens to the S&P 500 will happen to the Dow – whether the market holds support and rallies higher… or falls lower to test the January low then lower), the key reference levels to watch in the Dow Jones are the following:

The “Round Number” 12,000 Level
The rising 50d EMA at 11,972
The January Swing Low at 11,800

As you trade today’s session – and into the coming days as well – keep these levels firmly in mind.

Corey Rosenbloom, CMT
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1 Comment

One Response to “The SP500 Dow Jones and the Critical 50 day EMA”

  1. EWcub Says:

    EWcub says:
    March 6, 2011 at 4:47 PM
    …this seems to be something bigger for sure…