Triple US Equity Index Check to Start the Week Sept 12

Sep 12, 2011: 9:31 AM CST

What levels are we watching for set-ups/game-plans in the triple US Equity indexes – Dow, S&P 500, and NASDAQ?

Let’s get a quick check-up on these levels and current market structure as we start the week:

I’ll focus the majority of the description of structure on the S&P 500 as the picture is almost identical in both the Dow Jones and NASDAQ.

At the moment, there are three major chart factors we’re watching in each index:

  • The “Bear Flag” or “Rising Parallel Trend Channel” Price Pattern as drawn
  • The Confluence Resistance Cluster Overhead (50d EMA and 50% Fibonacci)
  • The Simple 2011 Price Lows on the Chart

In simplest terms, we can state that the indexes are currently forming a Range Consolidation/Contraction pattern within rising parallel trendline channels.

This “Rising Rectangle” develops in the context of a major overhead resistance cluster.  Any breakthrough ABOVE this cluster would be a significant chart-based development.

Otherwise, the immediate thing to watch at the moment as we start the week is what happens to price on this morning’s “bounce-up” off the rising trendline support.

In other words, we can look for the triple-indexes to trade short-term within the boundaries of these rising parallel trendlines until we see a firm breakthrough, which would suggest an impulse/breakout move was next.

For the S&P 500, the confluence overhead resistance forms at 1,235 with the confluence support at 1,120 – the 2011 low is 1,101.  The current “rising trendline” support line is just under 1,160.

The image is very similar in the Dow Jones:

The parameters to watch in the Dow Jones are the following:

  • Overhead Confluence Resistance:  11,700
  • Rising Trendline Pattern Support:  Under 11,200 (we’re under that at the moment – 11,000 is also a psychological level)
  • The 2011 Low at 10,600

I think the Dow will be the most interesting index to watch at the moment, as we see whether the bounce can take price back inside the parallel trendline channel… but if we see a move under 10,800, we’d look for a serious major support challenge at the 10,600 level to be the make-or-break moment for any sort of bullishness.

Finally, the levels to watch in the NASDAQ Index  are the following:

  • Overhead Confluence Resistance:  2,600
  • Rising Trendline Pattern Support:  Under 2,400 (currently bouncing strongly off it)
  • The 2011 Low at 2,330

We’re currently seeing  a strong bounce off the rising lower trendline support which opens the play to the 2,800 or even 2,900 level on continued strength.

And of course any movement under 2,450 then 2,400 suggests the 2011 low will be retested for our epic “Bull/Bear” Battle.

From a chart perspective – especially on the higher timeframes of all these indexes – any movement to new 2011 lows would be expected to generate a potential breakout/breakdown move that could be a momentous occasion.

As we start the week, keep all these daily levels in focus.

Corey Rosenbloom, CMT
Afraid to Trade.com

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

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5 Comments

5 Responses to “Triple US Equity Index Check to Start the Week Sept 12”

  1. Edmund Peh Says:

    The US markets is now testing the support levels now. Anything lower will seriously have some out-sized large moves!

  2. Checking in on Market Internals for September 13 | Afraid to Trade.com Blog Says:

    […] a bit of extra reference, take a look at my market update yesterday which showed the S&P 500 trading into a critically important rising ‘flag’ […]

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