Aug 25, 2010

Markets started down ugly but then hit minor support (Dow 10,000 and SP 1040) and drifted up the rest of the day. Should have looked for and seen that support level here – but it won’t last. That support – and yet more divergence (re the green lights below) – is the source of the bounce. Repeat – it won’t last. The market is really deteriorating underneath the indexes.

Short-term: 1 green, 1 yellow, 2 red – tending yellow/red
Intermediate-term: 1 green, 1 yellow, 2 red – tending yellow/red
Stock targets: 53% swimming, 19% neutral, 28% sinking

Looking at support/resistance levels. We now have resistance right above us (SP 1075) — much less the resistance (SP1125) that shut down the Jul/Aug runup. Below us, support at SP 1040, SP 1010, SP 980, SP 900 (could hold this one), and a whole bunch of support between SP 800 and SP 900. The various support levels between 900 and current levels is really quite weak. Could get a whoosh down thru to there after Labor Day and into Oct. Wouldn’t surprise me if 900 – 1100 becomes a trading range for up to a year. Anything below 900 and there is gonna be some big external news crisis that drives the market – likely sovereign defaults (plural). 900 prices in realism but no crises.

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