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Today's Technical Outlook-5/18/2012

Market Summary

David Chojnacki S1F Market Technician

A flat opening did not last long, as the Market began its steady slide to the downside 15 minutes after the open. The S&P quickly reached the 1320 level where it was expected that formidable support would be present. Traders put up a valiant effort to hold that level as we traded near there for nearly an hour and a half. Sellers finally won out and pushed the averages through support and down for the remainder of the session, leaving the major averages to close at their lows of the session. At the close, the DJIA was off 1.2%, the S&P losing 1.5%, and the Nasdaq100 falling 2%. Breadth was decidedly negative, 6 to 1, on above average volume. Once again, the indices made new lows, with prices now back to January levels. Near and short term technicals are extremely weak as the correction continues. RSI's are in the mid-20's, signifying an over-sold condition. RSI's have not been this low since August '11, when the indices were making a bottom prior to the recent rally. The S&P was unable to hold important support today, (.61 Fibonacci level-1320), and gave little respect to its 150D-SMA which stood at 1313. It is now down 8.1% from its recent high. A 10% correction would put the S&P right at its 200D-SMA(1278). Look for support near 1300, 1289(50% retracement of last leg), and at 1278. The Nasdaq100 blew right through formidable chart support at 2550. Look for Fibonacci support at 2500 and at its 150D-SMA(2492). Upside resistance is now at 2550 and 2575. We are nearing longer term support levels. Last year the correction from April through September was nearly 20%. With options expiration, over-sold condition, and Facebook IPO, look for a possible bounce today. The VIX spiked 9.9% to 24.49 and volatility is back into the Market. Futures are higher versus fair value in the early going.

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