Tuesday, June 29, 2010

Line In The Sand

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The S&P 500 briefly broke below the all important 1,040 support level late Tuesday afternoon, but managed to close above. The $CPCE Equity Put/Call Ratio 50 & 200 ema's are rising, any continuance in the moving averages may send the $SPX lower. The Volatility Index $VIX is also rising- bearish. Stocks trading over their 50 day moving average is at a low (contrarian bullish signal), but the longer term 200 day $SPXA200R  continues to decline (bearish). The S&P posted its lowest close since October at 1041.24.  S&P 1043 is the 50% retracement level of the July to May rally. June 2009 was the first material decline after the March bounce. The 1042 level is two standard deviations away from the normal S&P trend. Lastly, the 1040 low in May was book ended with a 1044 low in February and a 1042 low in early June. To put it simply the 1040 level has been a key pivotal point on three prior dips and the tide was turned. A breakdown below 1040 would be a major sentiment change from minor correction of -14% to a return to a bear market. So 1040 is the 'Line in the sand' some technicians are calling the triple bottom a bullish head fake. With that said the Q2 earnings reports will be key as well as several all important economic reports: Jobs Report.
As Abby Joseph Cohen stated this week on CNBC, the markets have priced in a 'slow-down' and valuations have never been better.


Another possibility is the Head & Shoulders Pattern.

Same Zell was a guest host on CNBC Tuesday morning, he said " The November election is the most important ever in my life time." Mr. Zell is spot on...midterm elections, will be a defining referendum between the progressives and their more fiscally conservative counterparts. If the progressives “win,” That will place a big headwind into the economy and the markets. Should the conservatives win, we'll most likely see a 'Clinton' style shift to the middle from Obama, which will be very favorable for Wall Street.

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