The comments below were provided by Kevin Lane of Fusion IQ.

As seen in the chart below, the S&P 500 Index bounced off its uptrend line near 900 a few sessions ago and managed a slight rally. However, that rally stalled at what is now new minor resistance near 925. So the S&P 500 is currently between an uptrend line and resistance. Above 925 the rally has a chance to resume, whereas a move below 900 will result in the current correction deepening.

The next stop down on any break of 900 would be the 875-880 support zone.  This is a more critical support area and the area the S&P definitely needs to hold. Any break below that and the S&P 500 would see a much deeper correction.

Typically, as we enter the mid- to latter summer, seasonal trends also tend to become less bullish as the summer rally is replaced by the summer doldrums. So, after an S&P 500 rally that went up 43.41 % from its trough to the recent peak, to expect a corrective wave during the seasonally weak mid- to late summer is not a far stretch.

At this point in the game we would suggest tightening up stop-loss levels and being less patient with pullbacks in names on the long side that are not performing well.

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Source: Kevin Lane, Fusion IQ, June 22, 2009.

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