SPX Levels

The SPX finally made it back into the safe home of the downward trend channel.

Now how long until the next sell off?

SPX Daily Chart:

RUT Levels

Taking a look at the 2 year chart, it draws similarities to the price action back in 2006 where it went into a 5 month consolidation phase after a downturn. Keep your eyes on the zone between 670 and 740 as a breakout above or below those levels may indicate another leg up or down.

RUT 2 Year Weekly Chart:



RUT Daily Chart:
The RUT closed above the 705 area today and now has a little room to move up if it decides too.

NDX Levels

The NDX was on fire Thursday and finally broke through the downtrend line on the daily chart. More importantly, it successfully retested the line on this mornings open and rallied hard after the bounce. While this is initial good news for the bulls, the probabilities are high that another sell-off into strength is right around the corner.

Look for 1843, 1900 and 1980 to resist up above. A fall below will likely retest the 1775 area.

NDX Daily Chart:



NDX 30 Day / 60 Minute Chart:

DOW Levels

The DOW broke up above the 12,500 resistance today and settled in the 12,650 area after being up as high as 12,702. Look for 12,750 to possibly be a resistance area.

DOW Daily Chart:

Ahead of the Fed

Taking a look at the daily chart of the S&P 500, we have put in a bottom (not sure if it's the real bottom) and have bounced back up to resistance at the downward channel trendline.

Anything can happen this afternoon, so be prepared. If you are in cash that may be the best position at this pivotal point.

SPX Daily Chart:

IWM Unbalanced Condor - Limited Downside Risk

On our last conference call I mentioned that I would post an example of an unbalanced Iron Condor to illustrate how we can create trades with limited downside risk in a volatile and uncertain market... or in a downtrending market like we have now.

The following trade is not a recommendation, but for Educational Purposes Only.

The unbalanced condor only has a profit probability of about 50%, but the risk of losing on the trade is all on the upside. In other words, if the market stays below the short strike of your Bear Call Spread on the top then you don't lose money.

We'll use the IWM (Russell 2000 ETF) example:

My method of creating the spread is a little bit of technical analysis and a little bit of looking at the probability of expiration. I built this trade around the resistance I see on the IWM near the 74 level. I then create a $2.00 wide spread on the top so I end up with:

Mar 74/76 Bear Call Spread > receive credit of .60 cents

I then find a bottom strike to complete the IC by finding a put spread that will pay me around .40 thus totaling a $1.00 credit for the entire Iron Condor.

To complete this spread I found the MAR 70/69 for a credit of .40

This allows us to sell the following:

MAR IWM IC 74/76/70/69 for $1.00

Notice that the exposure we have on the bottom 70/69 is $1.00 wide so if the IWM
falls down to 67 during expire week then we would lose on that position the $1.00, however since we we're paid $1.00 when we sold the Iron Condor we would break even.

If it gets completely breached to the upside the loss is $2.00 less the $1.00 credit you received, so a net loss of $1.00.

This allows us to put on a trade and not have to worry about the downside risk. If we rally in Feb and Mar to the point that the 74 short strike is breached, then you will probably want to exit the trade early for a small loss (unless you are still bearish).

Before placing a trade like this you will want to speak to an Investools Coach or Think or Swim Tradedesk person to answer any other questions you might have on the risks involved in this trade. Although the risk profile remains the same, there is a risk of early exercise of your short strike (either side) if it gets breached, but if your with Think or Swim, they can help you close the position out for a few pennies.

You will also want to close this position out at least 4 days before expiration to avoid gamma risk and assignment at expiry.

Again, this is a low probability trade, but the risk / reward is 1:1 so if the market continues to chop around for the next 8 weeks you will likely make money, and if the market tanks you'll still break-even. I don't go to heavy on these trades near bottoms like this, but while the possibility exists for another move down in a downtrending market it's a great way to minimize downside risk.

IWM IC Example: (For Educational Purposes Only)

DOW Levels

The DOW gave up early gains like the other indices to close at 12207.

There should be some support at 12000 should the market continue to move down on Monday.

DOW Daily Chart:

SPX Levels

The SPX moved in text book fashion to rally to downward trendline resistance and fall back down. The selling got pretty ugly and the close today took out yesterday's entire move up AND selling continued into Wednesday's bullish candle closing at 1330 today.

Person's Pivots predicts a support and resistance range of 1316 to 1357 on Monday with a slightly bearish bias.

News will likely be the driver Monday with the wild card being how the market decides how to act prior to Tuesday's Fed Announcement.

So far the price action is moving within what the charts are telling us. Keep your eyes on the support and resistance areas for clues on the next direction.

SPX Daily Chart: Notice how it smacked the downtrend line and fell. This was a low risk entry to trade the downside.

NDX Levels: A Downtrending Day for Tech

The NDX gapped up huge this morning well above the obvious resistance of 1843 and fell all day to close 37 points down at 1789.17 -- a 70 point range for the day.

There were lots of hints that the gap wouldn't hold this morning, and for maximum benefit the low risk entry to the downside was just a few minutes after the open. The Advance/Decline chart showed selling outweighed buying in the first few minutes and continued throughout most of the day. Having entered at the open one has a nice buffer in which to ride out some of the intraday noise while still being able to ride the downtrend throughout the day. The other technical that weighed heavily in the favor of selling today was that the gap opened well above obvious resistance I pointed out yesterday were the horizontal resistance intersected with the downward trendline on the daily chart.

On Monday watch the 1790 area where the NDX closed today as there is NO PRICE SUPPORT between 1790 and 1750 so it will likely fall a quick 40 points to 1750 if 1790 doesn't support. I've posted another 30 minute chart below to illustrate this in more detail.

If we end up with a bullish day on Monday I'd look for an upside target of 1821 for starters, but it will first have to clear 1800 to get out of the woods. If it can't get above 1800 the possibilities favor a retest of the 1750 area.

NDX Daily Chart: Note that the downtrend is still entact on the daily chart despite the gap up this morning. The buyers just aren't ready for a real rally yet.




NDX 30 Minute Chart: Notice precarious area below 1790 (the cliff)

RUT Levels: The Strong One Today

The RUT help up well today closing down only 4 points (.059%) compared to the rest that all closed 1.25% or more.

The price action has stayed within the range we might expect as seen on the charts. It's holding up nicely, but it will take some real buying to get it up and over the 705 area.

I remain short term neutral until the RUT either cracks above 705 or it slips to close below 685.

RUT Daily Chart:

NDX Levels

The NDX gained an impressive 2.09% to close at 1826 and cleared the highs of the last 2 day's candles. It also cleared the 23.6% Fib with the next upward Fib target (38.2%) at 1900.

The NDX futures were up after hours largely in part to well received Microsoft earnings and may open higher on Friday.

Upon moving up, 1843 may act as resistance on the move up, but if it can clear that area it should clear the downward trend and would be another short term bullish signal.

NDX Levels:

SPX Levels

The SPX closed up 13.47 today to close at 1352. An up day tomorrow will likely test the DOUBLE resistance area at 1364 where the downtrend intersects with the lows of 1/16.

Whether the SPX can break and hold this 1364 area or it bounces down from it will give us an idea about the strength of the current relief rally. A strong close above 1375 would show some nice strength going into the weekend ahead of next Tuesday's Fed Announcement.

On the downside, 1338 would be the first likely support area -- below that look for it to hold at the old closes of 1310. Below that, look out below.

SPX Daily Chart:

RUT Finds Resistance Near 705

The RUT Opened strong with the other indices, but once it hit the 705 resistance area it curled it's tail and drifted lower for the rest of the day. It was the only index to close negative albeit only by .71 cents.

Tomorrow the RUT will likely chop in this area again -- Person's Pivots are calling from a support and resistance range between 685 and 703.

RUT Daily Chart:

DOW Weekly

As seen in the weekly chart below, The Weekly Candle has formed a long tailed bottoming tail bouncing at both horizontal resistance and channel trendline support. This is presents a short term bullish bias.

DOW Weekly Chart:

DOW: 625 Point Range Today (5 yr high)

The DOW wins the prize this year for most volatile day. I went back on the 5 year chart and the second largest intraday range I could find was Feb 28th, 2007 with a 524 point range.

The more important aspect of today's move was how strong it closed. The price action created another bottoming tail which is short term bullish.

The index is still trading under the downward channel trendline so although this move looks bullish on first glance we must remember that we are in an intermediate downtrend and that any rally has a high probability to be met with heavy selling at key resistance levels.

Those likely resistance levels based on horizontal price action are:

- 12,600 last
- 12,500 next
- 12,400 mid
- 12,350 closest

It will be very interesting to see if we can hold Wednesday's gains on Thursday. Keep your eyes on the prices and resistance levels.

If the DOW moves lower look for 11,970 and 11,660 to support as they have in the last 2 days of trading.

DOW Daily Chart: 625 Point Range on Wednesday

RUT Levels (Strong Today)

The RUT put in an impressive day today thanks to the help of the homebuilder index that put in a 14.85% gain today. The daily chart shows a nice break of the downward trendline to the upside and a close today at 693.43. If the strength continues tomorrow the index will likely find some resistance in the congestion of the 705 area. Note that if it can clear and hold 705 that it would be pretty significant. Holding above that area would negate the lows of the last 2 weeks and may provide a base to climb back up to the 50% Fib level of 725. First things first, lets see if the RUT can reach and hold above 705 and then we can talk in more detail about the next level.

We are still intermediate bearish as we still have lower highs and lower lows since November 07, but we are watching this current bounce to see where we might find a low risk entry to trade the downside.

Here are the likely resistance areas based on Fibs and horizontal price levels:
- 740 next
- 725 mid
- 705 closest

To be objective we must also remember that the market can do what ever it wants, and it may just climb for the next 3 weeks to counteract the 4 weeks it just spend falling. Lets keep our eyes on the price charts for any hints to help us determine the next likely moves.

RUT Daily Chart:

SPX Levels

The SPX did an "about face" today and finished up strong forming a convincing bottoming tail candle today and more importantly there was BUYING going into the close which we haven't seen on quite some time.

What's important to remember is that we are in a BEAR MARKET. The charts point this out very clearly (lower highs, lower lows). We therefore must be very cautious if we are playing the upside since it is HIGHLY LIKELY that any relief really will eventually breakdown and may even search for new lows. IF the SPX can climb above and hold the 1390 level then we can re-evaluate and possibly change our bias to neutral. Until that happens the bias remains BEARISH and we must be on our guard for further moves to the downside. We will not try to predict what the market will do, but we are aware of what trendlines have been breached and importance of what that price action is telling us.

SPX Daily Chart: Note the close today just under the 23.8% Fib level

Dissecting Some NDX Sectors - Good News?

In late December it was apparent that GOOG was forming a wedge type pattern and January 4th the wedge was broken to the downside. At that point we used the width of the wedge at it's widest point to give us a downside target. The width was 146 points, so we measured from the break downward to give us a 520 target. (on Prophet Charts I generally draw a colored rectangle and then "duplicate" it and place it near the break to give me a visual of where the target is)

As you can see on the chart, GOOG hit this target level intraday today and then quickly bounced to finish up near the top 1/3 of the daily candle. This is some added evidence that the NDX may be putting in a short term bottom near 1700.

GOOGLE (GOOG) Daily Chart with completed Wedge Target



The Internet Index being one of the major components of the NDX has been leading the fall as you can see in the chart below. On the bullish side, the index came very close to reaching the 100% retracement and bounced up hard. On the bearish side, the upward trendline was breached today. The long tail on the daily candle today is a short term bullish indicator, but we should watch very carefully as a trendbreak is often the first hint we're given that the price will continue to breakdown.

Internet Index Daily Chart:



The Software Index broke the upward trendline yesterday but created a pretty convincing bottoming tail on the daily charts at some horizontal support levels. Although this looks bullish for the short term, the trend break paints more of an intermediate bear story. We'll watch this index carefully to see if it can bounce and then look for possible indications of breakdown.

Software Index:




Biotech appears to have found some short term short here, but like all the others it's broken the longer term upward trendline which I view as intermediate bearish. The key will be to watch if this index can reach and hold above the 790 area. It must hold 790 or there is a probility that the 725 area will be tested again and may even put in lower lows.

Biotech Index Chart:



Looking at the Weekly Semiconductor Index Chart we see that it's retraced 100% from it's January 06 highs. While this is short term bullish, 2 1/2 year upward trend was broken in late December 07 and paints more of an intermediate bearish picture. Watch for a retest of the upward trendline as this will likely act as resistance before another move down. If it can reach and hold above 410 it would have more of a neutral bias -- otherwise it will remain intermediate bearish.

Semiconductor Index Weekly Chart:

RUT Levels (2yr Intraday Low Hit Today)

Well, today we continued the move down intraday with an open at 650, but closed up fairly strong at 671.57 (just down 1.61).

This current move down has covered a 150 point range (800-650), and has done it at a 80% angle which is unsustainable. Although I've been anticipating a good bounce for a couple weeks now, the more we fall, the more likely a bounce. That being said, we continue to wait for evidence of a bounce and keep our bearish bias until we see some higher highs and higher lows ABOVE the 750 level.

RUT Daily Chart:

DOW Levels

The DOW gave us a bit of a scare over the long weekend, but the FED stepped in to TEMPORALLY put a freeze on the free fall. The daily chart looks very convincing that we've put in the start of a bottom as it bounced off of a May 2006 resistance level and closed at a March 07 support level, BUT that was just today. I would like to see a bottom just like every one else, but the evidence is not all there yet. We are still in a downtrend, and until we can put in a series of positive consecutive days I will continue to respect the downtrend. Always remember that the market has no rules and can go down as far as it wants...even below current support levels. Also remember that any rally that creates a lower high will likely prompt another heavy sell off that may even create lower lows -- Be on your toes.

DOW Daily Chart:

SPX Levels

The SPX finished the day to form a very nice bottoming tail candle, but the days to follow will actually tell us if we're starting to form a bottom or not. There are still plenty of geopolitical events that could continue to eat away at market prices so continue to use your best judgment, use good money management and be prepared for ANYTHING.

SPX Daily Chart:

NDX Levels (Apple Disappoints in After Hours Trading)

At the time of posting this entry (3:30pm PAC Tuesday) NDX futures were down 22.50 on the disappointing Apple guidence. We'll see how we open tomorrow.

I also thought it was important to take a look at the 4 major NDX sectors to see if there are any signs of bottoming on the individual sectors.

Semiconductor Index Weekly Chart:
Of note from my review is that the Semiconductor Index set a 4 year low today (bearish).


Software Index Weekly:
The Software Index broke it's 15 month old uptrend today (bearish).


The Biotech Index Weekly Chart:
The Biotech Index broke a 3 1/2 year uptrend trendline and continues to form a bearish wedge on the weekly charts. (bearish)


Internet Index Weekly Chart:
The Internet Index is testing a 2 year uptrend line. (neutral)


NDX Weekly Chart:
Still a good chunk of room to move down to the channel support (green circle)

NDX: Weekly

NDX Weekly Chart:

NDX: Down, But Not That Bad...

The NDX fell today, but not as hard as the others. Looking at the chart it appears to have found some temporary horizontal support here at 1842. The only thing that bothers me is that it breached 1846 which was the previous low from August. A couple points may not seem like a big deal as support areas are a "range," but from my experience they are often significant and something I should pay attention too. When I look back at these charts and I see that a trendline was breached by "just a little bit" a month ago, it really foretold the upcoming bigger move. The charts are always giving us hints, we just really need to pay attention.

NDX Daily Chart:

RUT: Support Levels in Sight?

The RUT continued to slide with everything else today falling nearly 20 points. I've posted a weekly chart below to outline potential support areas and to graphically show the 4 weeks of straight selling.

RUT Weekly Chart:

DOW: Another 300 Point Fall

Not much to say here other then the bear market is in full swing. There are some support levels outlined on the chart below.

DOW Daily Chart:

SPX: When Support and Channels Get Breached

Yesterday the day ended forming a high-wave doji which showed extreme uncertainty in the market in terms of what direction it wanted to head. As seen on the chart below the SPX has been in a downtrend, and was precariously sitting at the bottom of the channel (or the cliff). Once the momentum got started over the cliff, the selling continued and completely breached the channel support.

The day ended 39 points lower at a support horizontal support area from May 2006, yes May 2006! I'm getting the feeling that the rapid retraces of pull backs we saw in 2007 may be a thing of the past. Now we have to watch these conditions carefully to learn how these new market conditions tend to act.

A relief rally seems likely soon, but until we see evidence we have to honor the trend which continues to be down.

SPX Daily Chart:

DOW: Another Notch Lower

The DOW spent the day testing highs and lows but closed lower 34 points to form a doji on the daily charts.

The 12,600 area acted as resistance today and that's the level it will need to break thru and hold before a relief rally has any hope of some sustained gains. Weakness on Thursday could easily drop the DOW down to the 12,300 level where it should find some support.

DOW Daily Chart:

RUT: A Higher Close for Wednesday

I'm not sure where the strength came from outside of the homebuilders and banks, but the RUT closed up 2.48 points higher today while the other major indices posted loses.

The RUT is now sitting at 699.91 which is 18.3% off it's July highs and 12.5% off it's December highs. The drop was very fast and very steep, so we'll see if the market can conjure up some good news and shoot some adrenaline into this needy candidate.

I keep waiting for a relief rally longer then 2 days, but it's apparent that I must continue my patient vigil. If the RUT drops below 690 then 670 may be the next support level.

RUT Daily Chart:




RUT 60 Minute Chart:
The RUT is sitting in the middle of a Fib range and it's likely with the current volatility to hit one or both of these surrounding levels on Thursday.

The 690 level should act as support, and 715 should act as resistance. A break above or below either of those levels might tip it's hand to the next short term move.

SPX Sets A New 52 Week Low

The SPX lost 7.75 points today with an intraday low falling within 1.5 points of the 52 week intraday low set in March, but DID close at a new 52 week low at 1373.20.

The price action continues to confirm the bearish environment as rallies quickly change to sell offs. Seems likely that the market will put in a relief rally soon, but I've been saying that for over a week now so I'll no longer be holding my breath.

We'll see if this area will support tomorrow.

SPX Daily Chart:

My Big Fat NDX Doji

The Nasdaq 100 had a wild 58 point range today and ended up closing 21.80 points lower at 1872 near the 1875 support level. This close formed a "high-wave" doji on the daily charts showing a high degree of uncertainty in the market.

Tomorrow will likely have similar volatility as the NDX fights to find a direction.

NDX Daily Chart:

Cracking Lower, The Bears in Control

The selling continued as all major indices closed lower today, with the RUT putting in a new 16 month low and the SPX and DOW putting new 9 month lows -- VERY bearish.

The NDX had a bad day too, but only put in a 4 month low. More important technically to me on the NDX closed under 1900 which should have been an area psychologically support.

With Intel (INTC) getting hit in after hours trading, the NDX is likely to open lower on Wednesday.

SPX Daily Chart:
After breaking 1390 support and now only 5 point from 1375 support, it seems more likely that if we fall hard that 1362 would be the next likely area of support. On the possibility of a stress event there is longer term support at 1325.



NDX Daily Chart:
So much for the upward target I listed yesterday. The NDX continues to meltdown with no end in sight yet. Possible support areas will be 1875 and 1850, but don't be surprised if there is some "stress event" selling similar to what was seen on the charts August 16th where intraday lows reached 1805. That's not a prediction but just a heads up to what could happen again. It's important to understand the possibilities of what can happen so we can plan our trades accordingly and manage our risks.



RUT Daily Chart:
Doesn't seem like a stretch at this point for the RUT to retest the 670 area.



DOW Daily Chart:
The DOW futures where down 133 points at the time I posted this so a lower open seems probable. Below are some possible support areas.

NDX: Next Upward Target

If the NDX can get some more MOJO to the upside, 1980 near the 38.2% Fib looks like a probable target.

NDX 15m Chart:

NDX Weekly Revisited

Reviewing the NDX weekly chart, the 1900 area is acting as strong support so far and appears that a retracement of the downward move may be underway.

Note that the NDX is at the top of the 5yr weekly chart channel.

NDX Weekly Chart:

SPX Levels

The SPX enjoyed a bit of a rally today and closed up 1.09% at 1416.25

So far there is evidence that the downward momentum has eased for the time being, but this week with earnings and key economic data anything can happen. The charts are looking good for a potential relief rally to the 1440 area, but it will first have to break out of the current sideways channel between 1390 and 1430.

Keep your eyes on a break of the triangle forming to get a heads up on the probable short term direction. Look for breaks of the 1390 or 1430 levels for potential larger moves.

SPX Daily Chart: