Will 850 Hold? SP500 Weekly Chart View

Apr 5, 2009: 2:59 PM CST

With the S&P 500 closing just shy of 850, will this level hold as resistance?  A test of the 20 week EMA and negative volume divergence hint that it may.

Keep in mind that the market has recently ‘blown through’ key resistance levels so who’s to say this one is any more important?  But it does seem likely that bears might counter-check the recent bullish upside  momentum with at least a downswing that could start at this level.

Back to basic Technical Analysis, price is in a confirmed downtrend, and the moving averages are in the most bearish orientation possible.  Price has rallied up to test the falling 20 week EMA and we see a slight negative volume divergence (higher price on steadily lower volume) forming under the recent swing up.

We’re coming off a type of Three Swing Positive Momentum Divergence on the 3/10 Oscillator, so that hints that we might get a more powerful than expected rally, but divergences are often only good enough to forecast a short-term trade back to test the 20 EMA (on the timeframe in which it develops).  If so, then we achieved this target on Friday’s close.

In the week ahead, let’s watch the 850 level closely for signs of weakness on the part of the bulls… and if bulls can push through this resistance, then a challenge of the 2009 highs from January (at 950) may be the next likely target, no matter how much the bears want this market to head lower.

UPDATE:  For deeper analysis across the various stock market ETFS (QQQQ, SPY, IWM), check out the Bonddad Blog’s excellently written “Monday’s Market” post “Is this a Real Rally?

Corey Rosenbloom
Afraid to Trade.com

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6 Comments

6 Responses to “Will 850 Hold? SP500 Weekly Chart View”

  1. Anonymous Says:

    agree very much and i will likely cover @860 if we get that high. question regarding….. what you think of gold/silver and us dollar….. gold silver at support still but the sma has a craddle but ema does not …… i feel bullish for both gold/silver and the dollar. how do you view this?

  2. Anonymous Says:

    Good question. Well…..will it hold? What is your prognostication, your answer?

  3. Corey Rosenbloom Says:

    Anon,

    860 is probably a good point to declare that the rally has more legs than anticipated.

    Gold broke EMA support but it’s currently holding above $900 which is absolutely critical. We break $900 and it will shock a lot of people and knock out a lot of stops and could cause a sudden down-move. I’m bullish gold until we break $900. Same on silver.

    Dollar held the Cradle Sell and should be heading lower.

    It’s very difficult to be bullish both the dollar and gold – they typically have an inverse relationship, though that’s not necessarily been the case recently.

  4. Corey Rosenbloom Says:

    I think it will… but then I thought the Confluence Fibonacci would hold at 805 and then now but the bulls have shown their resilience. It’s so hard to fight them. The 20 week EMA could bring out more aggression in the bears but if we break above 860… that would change things bullishly.

  5. Anonymous Says:

    My guess is the market will gap over the resistance levels like it did last week – that way they don’t have to test it at all.

  6. Corey Rosenbloom Says:

    Indeed it could – that would put us right into a short-covering rally which would further fuel the upward movement.