Technicals: Midweek Triple U.S. Stock Index Check (SPY, DIA, INDEXDJX:.DJI, INDEXSP:.INX)

Corey Rosenbloom:  Are the indexes breaking down from their “Creeper Trend Rally” or else continuing more of the same slow melt-up? Let’s take a look at the Big Three US Stock Market Indexes – from the Daily Chart – for clues and levels to watch for references.

First, the S&P 500 Daily:

Let’s keep it as simple as possible, putting the chart in terms of main ideas and key index (price) levels to watch.

First, the key support level for bulls to watch is 1,340 – it’s a prior price resistance level as well as a recent minor support level in February.

Despite the overbought and divergent status, the market retains a slight bullish bias so long is the index remains above 1,340.

Otherwise, further selling pressure – breaking under 1,340 – suggests the overbought and divergent condition is too much for bulls to shoulder, which likely results in a retest of the major support confluence at 1,320.

Should sellers break the index under 1,320 and then on beyond the “round number” 1,300 level, we would be looking for a steeper sell-off towards 1,260 or 1,280.

One theme that you’ll see is clear from all charts is that this overextended rally is grossly undercut by negative divergences in both volume and momentum.

The picture is very similar in the Dow Jones… which failed to close meaningfully above 13,000:

We see the same negatively divergent volume and momentum readings which serve as a non-confirmation of the rally.

Still, the market currently sits upon the prior resistance level from mid-2011 and recent (February 2012) support level near 12,800.

That will be the pivot reference to watch – bullish above; bearish beneath.

To be more precise, the more important level for the Dow Jones is the confluence of the rising 50d EMA and rising daily trendline – both of which intersect at the 12,700 region.

A break under 12,700 that continues under 12,600 suggests 12,200 will be the next target on a breakdown from here.

The NASDAQ failed at 3,000 – similar to the Dow’s 13,000 level:

I annotated recent volume and momentum divergences for reference of past performance.

The NASDAQ gives us easy ’round number’ reference levels to watch – 3,000 is the overhead resistance that contained price this week, and 2,900 is the support pivot to watch from here.

The 2,900 level was the prior highs from 2011 and rests half-way between the 20 and 50 day EMAs.

A breakdown under 2,900 suggests the rising 50d EMA will be retested at 2,850 and a firm movement under 2,850 extends the short-term target down to 2,750.

As the next few days unfold, continue watching these short-term pivot reference levels for clues as to which scenario will unfold:

The “Breakdown” move so many people expect… or the “Creeper Continuation” which few people think can keep happening.

Related: Dow Jones Industrial Average (INDEXDJX:.DJI), S&P 500 Index (INDEXSP:.INX), Nasdaq (INDEXNASDAQ:.IXIC), SPDR S&P 500 ETF (NYSEArca:SPY), SPDR Dow Jones Industrial Average ETF (NYSEArca:DIA).

Written By Corey Rosenbloom, CMT From Afraid To Trade

My name is Corey Rosenbloom, CMT (Chartered Market Technician)  trader, educator, analyst, and I am excited to share with you my  experiences studying and trading the markets and to hear from you  regarding your experiences, challenges, and frustrations, and successes.  My goal is to create a community dedicated to reaching out to those who  have been burned by the market or are anxious about risking their money to make money in the stock, options, or futures markets. Together, we can share strategies and learn how to overcome crippling fears that keep  us from achieving our highest potential.

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