July 7, 2009, S & P 500 action

The Head & Shoulders pattern was triggered.  Based on the last 15 years of such instances, we have a 75% chance of reaching the measured move, which is in the neighborhood of 822, which is a 7% decline from here.  See the previous posting.

Other things to consider

  • S & P 500 closed below the closely-watched 200-day moving average.  200 days is the approximate number of trading days in the last 12 months.  It represents the average price paid over the last year, so prices below it represent losses, which no one wants to see again.
  • Other important levels to watch include Ned Davis’s–the man, not the service–stop-loss level of 875.  Dennis Gartman calls 880 a “hugely important level.” 
  • The 875-800 neighborhood should also serve as support–that’s what’s supposed to happen, anyway–because it’s the level we broke out from at the beginning of May.  That is, it marks the bottom of the trading range of the last 2+ months.
  • The S & P 500 finished just 1.1 points off its low today.  There was an early afternoon rally attempt that fizzled out after about an hour.  Pretty much down from there.
  • One bright spot is that volume also retreated on the day.  What would have been much worse would have been to see a spike in volume, which would suggest a run for the exits.

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