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Stock Market Ends Week Flat Between Support and Resistance

Stock-Markets / Stock Index Trading Feb 28, 2010 - 03:33 AM GMT

By: Piazzi

Stock-Markets

Best Financial Markets Analysis ArticleS&P ended the week flat losing 5 points, -0.4%.

This is a weekly chart


There are a few things that I’d like to point out on the above chart.

First of all, there is no clear winner among a number of wave configurations that are active. I have 4 different alternates for January peak. Only one of them is extremely bearish.
Another point is that the lows of July and Feb form a picture perfect channel (dashed black) around price action, with an actionary median line from November low (thin blue line)

Now, note that weekly corrected in Feb slightly below the area of a half range marker (1070) that I have had on the weekly chart as a median line of an actionary price zone for many months.

Notice that all weekly MAs are flattish and compressed around that area. As long as index remains in the channel, above its MAs, above the support zone, it has a positive technical profile.

This is clearly an area of strong technical support. It is, IMO, all a laid back, longer term player with  mature positions need to know to assess risk and take risk mitigation actions.

It also can help a shorter term player in the sense that it was the area that squeezed the shorts and failed the bears.

A loss of this support area may embolden the battered bears and target 1000 as a somewhat weak support and 950 as a much stronger area of support

This is a daily chart of the index

There are a few things that I’d like to point out on the above chart.

First of all, there is no clear winner among a number of wave configurations that are active. I have 4 different alternates for January peak. Only one of them is extremely bearish and that one look extremely dubious at this time.

Another point is that the lows of July and Feb form a picture perfect channel (dashed black) around price action, with an actionary median line from November low (thin blue line)

Now, note that weekly corrected in Feb slightly below the area of a half range marker (1070) that I have had on the weekly chart as a median line of an actionary price zone for many months.

Notice that all weekly MAs are flattish and compressed around that area. As long as index remains in the channel, above its MAs, above the support zone, it has a positive technical profile.

This is clearly an area of strong technical support. It is, IMO, all a laid back, longer term player with mature positions need to know to assess risk and take risk mitigation actions.

It also can help a shorter term player in the sense that it was the area that squeezed the shorts and failed the bears after Feb 5 low.

A loss of this support area may embolden the battered bears and target 1000 as a somewhat weak support and 950 as a much stronger area of support

This is a daily chart of the index

McClellan Oscillator made a new high after Feb low. In previous occasions during the rally off the March low, this led to further price gains. Summation Index has also registered a buy from close to neutral. That, as well, led to further price appreciations as market in 2009. Same is true of MACD buy signal from below zero, Bullish Percent Index buy signal and a host of others.

Bears keep constantly telling us that sentiment is bullish – whatever the hell that might mean. They also say that volume is absent, but volume has been shrinking on aggregate since March 2009, and that has not kept the bears from being roasted alive as market marched on.

The short of it is that bulls have all the technicals lined up. Bears, well, I don’t know what they have.

Now, if all the technicals that bulls have lined up fail to deliver, and technicals roll over, and support fails to hold, then, we can interpret that as a change in inherent characteristics of the market and its price action.

Shorter term, I have been of the thinking that we had not seen the last of the current mid-term downtrend and further softness would be seen prior to more meaningful price gains. I still think so, but, first, as I have repeatedly said, it really does not matter what I think, we follow our charts; second, price action these past few days has made me doubt that line of thinking.

This is 60-min chart of the index

We have had a short term downtrend from Feb 20, but bears have not really capitalized on that. We have a well constructed channel on the chart above. Bulls need to take the price to the upper half of that channel. For now, 1080 – 1090 area seems to be good first zone of support. Further below, as long as price stays above 1061 pivot, it’s either consolidating or rallying.

Bears, if they are serious and have enough capital and conviction to make a difference, should break 1080 as a start and then take the index below 1061.

Support is at 1090 and 1061, resistance is 1107 and 1133.

Long term trend is up. Mid-term trend is down. I think short term trend is neutral (a move above 1110 may indicate a short term uptrend is underway).

Have a Nice week!

By Piazzi

http://markettime.blogspot.com/

I am a self taught market participant with more than 12 years of managing my own money. My main approach is to study macro level conditions affecting the markets, and then use technical analysis to either find opportunities or stay out of trouble. Staying out of trouble (a.k.a Loss) is more important to me than making profits. In addition to my self studies of the markets, I have studied Objective Elliott Wave (OEW) under tutorship of Tony Caldaro.

© 2010 Copyright Piazzi - All Rights Reserved Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.


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