Technical Talk: Any bounce to be short-lived

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

As seen in the chart below, the S&P 500 is now down 4.25% after violating its uptrend line (green line). The sell-off has been on low volume, commensurate with the summer malaise. Given the short, quick sell-off we would expect some counter-trend rally to develop here for a few days. However, given the larger macro issues and the backdrop of September/October looming we expect any bounce to be short-lived and revert lower in relatively short order. The most im­portant longer-term resistance level remains near 1,129 (red line)

Near-term resistance comes into play near 1,087, followed by 1,096 and then 1,106 (see 31-day chart below). We think any over­sold bounce can reach the latter two levels before reverting lower.

S&P 500 Index – daily chart

S&P 500 Index – 31-day chart

As seen above in the 31-day chart there are three possible levels of resistance on any rally attempts: 1,087 (red line), 1,096 (purple line) and 1,106 (orange line).

Source: Kevin Lane, Fusion IQ, August 17, 2010.


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