Saturday, January 29, 2011

SP500 Still Support Holding (For Now)

The SP500 stopped its decline Friday almost precisely at the convergence of median line and lower channel line support.  See my post  We also have a strong negative divergence sell signal that suggests the support will fail to hold.  If support fails next week as is anticipated, then the SP500 should return to the lower channel line from the July 1 low which is presently around 1150 and just below the 200dema around 1174.  If support does not fail, then the bulls will rout the bears as the major median line may prove to be the path of least resistance in an ongoing uptrend.  It seems hard to believe that could be the case at the moment with overwhelming evidence of diverging breadth and momentum coupled with investor and trader optimism.

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