wealistic wednesday, page-20

Here is a closer look at what might be going on with the S&P atm.

Before reading this you might like to get a daily of the S&P for the past couple of months in front of you otherwise reading this will probably a waste of time.

I will consider the following 3 ranges:

Range 1 (R1) - 8 July low (869.32) to 7 August high (1018). R1 is 148.68 points.

Range 2 (R2) - 8 July low (869.32) to 28 August high (1039.47). R2 is 170.15 points.

Range 3 (R3) - 17 August low (978.51) to 28 August high (1039.47). R3 is 60.96 points.

I will also consider the following retracements:

Retracement 1 – 7 August high (1018) to 17 August low (978.51). Retracement 1 is 39.49 points.

Retracement 2 – 28 August high (1039.47) to 2 September low (991.97). Retracement 2 is 47.5 points.

As I'm attempting to define what is going on with the trend in the coming days to weeks, I'm looking at what has happened since 8 July primarily, with a secondary focus on the major trend since the 6 March low.

The pattern and structure of the trend since 8 July and particularly since the high of August will be enough to reveal some clues.

........

Retracement 1 was a 26.56% retracement of R1. The low was 2.32 points below the 1/4 retracement mark and 4.4 points below the corresponding fib retracement level.

The index could be said to have held those levels as there was a recovery of the 1/4 retracement level and corresponding fib level within a few trading hours and the breach of those levels was only marginal. Holding those levels kept the uptrend since 8 July in a strong position.

The low on 17 August at 978.51 was also only marginally below (3.98 points) the prior swing high of 27 July further suggesting strength and support coming in at high levels.

The index then rallied from that low and made a new high on the 4th trading days from low. That rally produced R3.

After the high of 28 August (1039.47), the index fell 47.5 points to produce Retracement 2. I'm not sure what probabilities a 180 day low here carries at this stage of proceedings.

Retracement 2 was 27.92% of R2 and a 77.92% retracement of R3 (which is an indicator of weakness of itself). The 2 September low was 4.96 points below the 1/4 retracement mark of R2 and 7.34 points below the corresponding fib retracement level.

Therefore Retracement 2:

- Was larger in percentage terms than the Retracement 1,

- Dipped deeper below the ¼ retracement level than as occurred in Retracement 2, and

- Stayed below that level for more time.

These facts suggest that the up trend has weakened.

.......

Tonight is the 4th trading day from the most recent low 2 September. If the index does not break to a new high tonight that is further evidence supporting the suggestion that the rally has weakened.

These are slight indications but enough to feel confident a more significant turn down could be very close.

.......

The similarities of the pattern of trend over the past three trading days with what happened after the low on 23 June are also suggesting to me that unless tonight (or tomorrow at the very latest) shows strength and breaks to new highs, a pull back to below the most recent low of 992 is a probability.

In that event, the downside target would be a 3/8 retracement of R2 at 975.66 or just higher at the horizontal support of the 18 August low at 978.51.

An outside day finishing down tonight would be a gift for a short trade.

Caution: The 4th attempt at breaking support of resistance does carry the probability of going through that support of resistance, so if we do go higher from here this will be the 4th crack at 1037 (1/8th extension of R1). That said, any short position must have a tight stop if entry is around this level.

Good luck with all that,

Cheers Chris (looking for a short entry)