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TAM's Morning Cup of Jo: June 13, 2011

|Includes: QQQ, SPDR S&P 500 Trust ETF (SPY)

On Friday afternoon TAM’s WIR echoed the “Talk of the Town” as all the pundits clamored on how the SPX has just completed 6 down weeks in a row; which is the first since 2002. This statistic is amazing considering the largest bear market in history (since the Great Depression) was in 2008. Interestingly enough the markets haven’t really seen any kind sort of devastation as of yet. On that note, the extremely bearish weekly Double Tops have brought the markets back to their beginning of the year levels.
SPX Weekly

NDX Weekly
With the patterns in place and both containing Stochastic & Volume Divergences, the likelihood is that necklines will be broken at some point this summer. If/when this happens we’ve technically determined the most likely support, based on measured moves and prior converging trend lines. 
SPX Daily

NDX Daily
Given the velocity of this downturn it is difficult to determine if there will be a meaningful bounce off the necklines. It was not more than two weeks ago the SPX was pushing 1,350 and the NDX pushing 2,400. As of Friday’s close all Four Sisters are within spitting distance of their respective 200-DMA’s (corresponding to their necklines).
200-DMA vs Friday’s Close
SPX        1,253   vs. 1,271              1.4%
NDX        2,215   vs. 2,221              0.2%
DJIA       11,687  vs. 11,951            2.2%
RUS        768      vs.  779                1.4%
If the sisters do in fact show some resilience at these levels, it will present an opportunity for traders to play the bounce with limited risk, allow investors to reposition with a greater short weighting or simple hedge further. Whichever the case; break now, don’t break now; keep your wits about you, always start the day with a plan and be decisive when making a decision.
“Education Breeds Confidence, Confidence Breeds Conviction and Conviction is the most essential ingredient to Success.”
                                                      – Kevin A. Tuttle