Some Technical Thoughts on the Market ...

Per our post on Monday evening, it appears that the 1310 level may actually be on the horizon.  We understand it is still early in the trading day to make these statements as any politician and/or Fed official can make rosy comments and positively impact the market, at least for the short term.  In addition, we have seen the market paring losses going into the close consistently the last few trading days.  However, some technical indicators stand out now with the S&P 500 being down 1.1% at 1326.5.

First, the current level is certainly below 1340 which is the 23.6% Fibonacci retracement.  The next Fibonacci retracement level is 1290.  However, based on the lower Bollinger band and our own opinion of the chart, we still think the next support level is around 1310. In addition, the 10-day EMA, although is now negatively sloped, is still slightly above the negatively sloped 50-day EMA.  If the two cross, which would probably be around the 1315 level, we could see a dead-cat bounce.

Lastly, the difference in the MACD (moving average convergence-divergence) has turned negative after a positive peak of nearly 8.0 on 6/20.  It appears that the downside momentum is … gaining momentum.  The last time we saw this was early May and the S&P 500 dipped around 8% the following three weeks.  Also, the last time that not only the downside momentum (based on MACD) increased but also S&P 500 went below a Fibonacci retracement level was in early November of last year, after which it declined around 9% in just a few weeks.    

Again, it is still early in the trading day, but S&P 500 is down 1.1%