Saturday, August 27, 2011

MTU Weekend Ed. - Support and Resistance Matters (8/26/11)

Reading the crash (8/5/11) , Benchmark Low (8/12/11) and Wave Logic (8/19/11) offer analysis and a framework regarding whether the recent crash is the end of a correction or the beginning of further declines. The stock market is in the process of establishing or confirming the proposed benchmark low (Chart 1). There’s little to add to the analysis framework at the moment.

In addition to wave counts, Chart 2 updates the general technical profile.

The rebound in SPX has now retested and closed at three notable trend lines highlighted in Reading the crash (8/5/11) -

(a) the lower channel line off the 2010 low, where the upper channel line connects the April 2010 high to the May 2010 high (blue lines)
(b) the trend line connecting the June 2009 low and June 2010 low (red line)
(d) the lower iso-angle line off the 2009 low, where the upper iso-angle line connects the 2009 low and the 2011 high and the middle line connects the 2009 low and 2010 low (green lines)

A successful break above these trend lines will reclaim key support and a rejection at resistance will spell typical weakness. Note that SPX has already reclaimed potential support from
(c) the 2009 high (green horizontal line)
(e) the 200-week simple moving average (black)