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S & P - Transitioning? Intra Day Trend Is Down; Daily Holding Up, Literally

Monday  5 October 2009

The 120 minute chart shows a confirmed trend down as of Friday, once the
30 September low was broken, 1041 area.  That gave the green light to go
short, which we did at 1038.  Friday's low, 1015, showed a mid-range close, indicative of some buying at the lows when sellers should be in total control. 
The close was mixed in that there could be continuation down today, or a
potential rally.  The ability to rally above the 1025 area Monday, coming from
an oversold condition, confirmed the oversold area and suggested a rally of
some kind.  [The bottom channel line is indicative of when price reaches an
oversold area.]

Price did rally thoughout the day, and we have targeted 1041 - 1045 area
as a potential resistance level from which to lauch new short positions.  1041
is a half way retracement of the recent high to low, and 1045 is where the
upper channel comes down from the high and act as resistance.  The key will
be how price responds as it reaches either area.  A counter-trend rally usually
runs 1 to 3 days before resuming the larger trend, down in this instance.

120 min 5 Oct 09


The daily chart is more controlling than the intra day, and while one can make
an argument for a top at 1075, price is still trading above the 50% retracement
level, [a sign of relative strength], and the swing low from 2 September remains
intact.  Once broken, it will confirm a change in trend on the daily chart.

Contrast the daily with the 120 minute chart.  In the latter, the previous swing
low at 1036 on 25 September was exceeded in this most recent decline.  Not
only was there s lower low, the recent decline was 50 points, compared to the
initial decline from the 1075 high, a drop of 39 points.  Selling has gained
momentum from the contract high, but it still needs confirmation.  As an
added note, volume on the decline was the strongest since the March lows. 

The signs of change are building.  Short term is clear.

S & P Daily 5 Oct 09