Weekly Key Support Levels to Watch in Dow Jones and SP500 for Aug 22

Aug 22, 2011: 7:33 AM CST

On the weekly chart picture, a clear floor of support exists where we start the week of August 22nd.

Let’s take a quick weekly look at the Dow Jones and S&P 500 as we start the week with respect to this higher timeframe confluence/key support area.

There are three specific chart-points to watch on the Dow Jones weekly chart picture:

  • The 38.2% “Bull Market” Fibonacci Retracement at 10,414
  • The 2011 Index Low of 10,605
  • The 200 week Simple Moving Average at 10,729

For simplicity, you can refer to these as 10,400, 10,600, and 10,700.

What surprises me is that the psychological “Dow 11,000” level has played only a minor factor in the grand picture – the key confluence reference chart levels rest just under the 11,000 level that’s widely discussed on TV.

The simple play would be to observe any sort of price strength off this indicator confluence and then see how far the bounce travels into daily or weekly resistance into the 11,700 region.

Of course, an eventual failure for buyers/bulls to hold firm at the 10,600 weekly confluence opens the door for another market decline to the 10,000 level.

The picture is similar in the S&P 500, but the confluences are tighter and easier to remember for reference:

Putting it in simplest terms possible, 1,100 is the critical “Bull/Bear” battle line based on the chart landscape.

Not only does 1,101 (or 1,100 for easy reference) reflect the 2011 price low, but it’s also the 38.2% “Bull Market” Fibonacci Retracement.

While not much of a factor at the moment, the 200 week SMA (which played an important resistance role in April 2010) resides at 1,153 (1,150 for easy reference).

Just like the Dow Jones, any bullish rally off these key weekly levels should be expected to bounce into Daily and even Weekly resistance into 1,200 or 1,250 at best.

Alternately, another wave of selling that pressures the index under 1,100 is likely to trigger another feedback loop (bulls selling to liquidate and bears selling to add/put on short-sale positions) which opens the market to the 1,040 (price) if not 1,020 (50% Fibonacci) downside target.

In the week ahead, continue watching these weekly reference levels – they’re not going to change anytime soon and the market will be watching these levels closely.

Corey Rosenbloom, CMT
Afraid to Trade.com

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

Corey’s new book The Complete Trading Course (Wiley Finance) is now available!

Comments Off on Weekly Key Support Levels to Watch in Dow Jones and SP500 for Aug 22

Comments are closed.