Having flashbacks to the days when triple digit swings in the
Dow were just another day at the office? This week has felt a lot
like 2009. Let's try to make sense of it so far.
Looking at the chart of the S&P, we find that the Monday and
Wednesday close is a support level that dates back to the March 12
close of 1,552. Until April 5, the S&P traded in a one percent
range reaching a high of 1,570 on April 2. The index formed a base
allowing the oscillators to unwind. Technicians view basing
patterns as healthy price action in a bull market.
On April 5, the index sat at 1,553-just slightly below the
support level of 1,570. By April 11, the index had rocketed up 2.5
percent to 1,593. This appeared to be a significant breakout from
the base-something technicians were expecting.
Then came this week. A sharp sell off in commodities that
started the previous Friday sent the index plummeting to 1,552 on
Monday-roughly the April 5 level before the breakout occurred.
The next day the index closed at 1,572. Those familiar with
will notice the nearly perfect 50 percent gain from Monday's 40
point tumble. Wednesday, the index closed at 1,552-Within one point
of Monday's close and right at the March 12 level of support.
Let's sum up:
March 12- 1,552 established; April 5- traded in a range of 1,552 to
1,570 until this date; April 11- S&P had gained 2.5 percent to
close at 1,593; April 15- Fell to 1,552-the March 12 support; April
16- Retraced 50 percent of the loss to close at 1,574; April 17-
Fell back to 1,552-the March 12 support.
Now that we found technical order in the chaos, let's answer the
question that everybody is wondering: Have the events of this week
caused technical damage to the markets that would signal more
downside action ahead? Although nobody can predict the future, we
can analyze the present and past. As of Wednesday's close, there is
no technical damage to the S&P.
The March 12 - 1,552 support level is important, but the focus
will be on the 50 day moving average currently at 1,542.43. That's
a little more than 0.5 percent below Wednesday's close. If that
level is taken out on heavy volume, the S&P will likely see the
same price action that Apple (NASDAQ:
) saw Wednesday as a key level of support was breached. eBay
) and American Express (NYSE:
) posting disappointing earnings on Wednesday could make 1,542 more
difficult to hold.
Apple Broke Down - What do the Charts Say Now?
Also of note, is
of the S&P going back to 1960. It reveals something alarming.
At current levels, the S&P has formed a triple top. If the
index fails to break out of this long-term pattern, some
technicians will argue that a huge sell off could be in store for
the near future.
On the other hand, if a break above the previous two tops takes
place, a whole lot of upside could be the future.
Disclosure- At the time of this writing, Tim Parker was long
(c) 2013 Benzinga.com. Benzinga does not provide investment
advice. All rights reserved.
Profit with More New & Research
. Gain access to a streaming platform with all the information you
need to invest better today.
Click here to start your 14 Day Trial of Benzinga