The
S&P 500 is again testing support at 1220 after a sharp fall
on Tuesday [2] broke below the trendline, signaling a slowing of momentum. The
index has consolidated for the last three days in a narrow range at the support
level. Weak closes and lower volume on Friday [5] favor a downside breakout;
confirmation would be a close below Thursday's low. A downside breakout would
signal a test of secondary support at 1190 and possibly primary support at
1140.
A close above 1240, on the other hand, would signal resumption of
the up-trend, with a target of 1280: 1250 + (1250 - 1220).
The big picture is acquiring a bearish hue. The primary trend is up and
displays unusually high (weekly) volumes, but
Twiggs
Money Flow (21-day) crossed below the zero line after a bearish
divergence,
signaling distribution. The index has also failed to break out of the bearish
rising
wedge pattern and may now test its lower border. Low 63-day volatility warns
of a strong move ahead but gives no indication of the direction.
Primary
support is at 1140; resistance at 1260, the upper border of the wedge pattern.
