S&P '1040' bounce or break ?

Market opened way down and continued to slide through most of the day. Support was broken at one point, but with a small bounce in the last 10 minutes of the day, it managed to close above support 1040.

In last few days I keep telling people the hidden problems of the market. I hope people who read my blog can get the alert. It's risky to start a long or short position at this time because market is at the critical support area right now. It will bounce from here or it will break the neckline of the head and shoulder formation.

The support 1040 is so important because it is the February, May and June critical support, more important it is the low of right shoulder and the neckline of the bearish head and shoulder formation. If the 1040 neckline is broken, the projection of another 180 points ( 1220-1040=180) down will give us 860 (1040-180=860). That's the reason the market has struggled at the critical support all day today.

Above you can see the 5 minutes chart today. Had that last minute leap not happened, support would have been broken at the close. A lot of technical analysts use the closing price as a formal and true price to do the work, therefore today's final rescue I look at it as a little positive sign.

With such a momentous spike downward, we will probably see a reactionary bounce tomorrow. Please note that I used the word "bounce" and not "rally". Let's be honest, things don't look good right now. The original set-up was for a rally off the June low, a retracement to about 1080 -1085 and then the resumption of the rally. That didn't happen and that's the time I mention to all of you that the market is weak and watch for a sudden sell off.

Market is oversold now, but not that oversold to earn a powerful V-shape rally. It may rally the next two days, however, this is not my favourite spot to push a buy button because the risk reward ratio is not good enough. If you want to short, now is too late because market is sitting right on the 1040 critical support. You need to wait until the support is broken decisively, then you may start shorting it, but the risk is higher for the bear at that time though.

First support 1020 which I don't really suggest at this moment. If you want to buy this market, you need to wait for the panic moment, The support number I mention yesterday S&P 1008 which is the 38.2% fib retractment level of the last rally from 667 to 1220 and S&P 1005 which is the 80 weeks moving average are the two supports I appreciate. You may start accumulate some at this level if you are aggressive.

I am a very prudent person, I told you I hate losing money, so I will wait for the 952 which I mention yesterday is the projection of last leg down of 179 points [1219.80-1040.78], and the second  leg down to 952 is measured by subtracting 179 points from the 1131.23 high. Also 943 which is the 50% fib level from 667 low to 1219.80 high. When the market go down to 943 to 952 with panic mode, I will be the first person to push the buy button for sure.

I keep reminding people numerous time that the rally from March 2009 to April 2010  is a bear market counter rally, as long as it finish running its course, it will resume the second phase down, and second phase always is the most devastating one. You have been wanted!