SPX: Looking Purely at the Technicals

The News was full of experts again today saying that we're bottoming here. I suppose their evidence was yesterday's New Low and the fact that today wasn't a New Low. Can you imagine being in a bull market and having the experts come on everyday calling a market top because yesterday was a New High and today we closed lower? It's never made sense to me why everyone is always trying to call bottoms and tops. I suppose it has to do with ego, but it's not a good way to try and make money.

Lets take a look at the daily chart to get an objective look of what's really happening here with the price action. It's not my job to call "bottoms," nor will making a bet on bottoms produce profits for me. I am more interested in trading with the prevailing trend rather then going against it.

The charts provided a rising wedge pattern (bearish pattern) that broke on Jan. 9th indicating a new move down was developing.

Last Friday the SPX broke and closed below the November low and support area at 750. Yesterday we put in a new low at 696.33.

What generally happens once a support area is broken is a retest of that level. If the bears win then the old support area becomes new resistance and the price falls further (As the banking index did this week), but if the bulls win then the price continues to move up over the support area again.

We should expect this move back up on the SPX to retest 750 as it's a normal pull back. The key will be to see how it reacts once it gets back to 750.

Patience is the key here as moves can take a long time to develop, especially as we retest old support and resistance areas like we are now. There are often some ugly battles fought at these lines.

Trend is still down until further evidence suggest otherwise. Go with the flow.

SPX (S&P 500): Daily Chart