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Today's Market Observation  06.29.2010  Mon  Tue  Wed  Thu  Fri  Swenlin Archive

Support Holds... Barely

BY erin swenlin Heim | june 29, 2010

Market opened way down and continued to slide through most of the day. Support was broken at one point, but with a small bounce in the last 10 minutes of the day, it managed to close above support. You can see this in the 10-minute bar chart below:

Picture 5

Had that last minute leap not happened, support would have been broken at the close.

Below is a 6-month chart of the SPX. It is easier to see in this time frame how close we came to closing below support.

Spx6mo

With such a momentous spike downward, we will probably see a reactionary bounce tomorrow.  Looking at the TRIN chart we see a reading of 5.4. Generally anything above a 2.0 signals a move up the following day.

Picture 3

The CVI also dropped to very oversold territory and as an ultra short term indicator, that points to a bounce as well.

Picture 6

Please note that I used the word "bounce" and not "rally". Let's be honest, things don't look good right now. The PMO had a negative crossover today and although support held, Carl and I don't think it is likely to hold much longer. The original set-up was for a rally off the June low, a retracement to about 1080 and then the resumption of the rally. That didn't happen and that is not good.

Looking at the Decision Point Alert Daily Report you can see that all of our initial sector BUY signals failed closing out at a sizable loss today.

Picture 7

Bottom Line: Today's large drop accompanied by a spike on the TRIN and CVI indicate we will see a bounce tomorrow. However, we are seeing major signs of internal weakness as the market continues to close well below the 200-EMA; so, although support held today, we don't think it will hold on the next assault.

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Technical analysis is a windsock, not a crystal ball.

Erin Swenlin Heim

Copyright © 2010 All rights reserved.

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Erin Swenlin Heim | Decision Point | Redlands, CA USA
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