SPX500 Downside Just Warming Up

Whilst the investing world still talk of ‘buying into weakness and growth’, I will continue to happily sell into any rally as I assume further downside is to come. My timeframe is not one of an investor so perhaps we can both benefit here but, as a trader, sticking with momentum is a large part of my plan.

SPX500-min

We can see that the downside has begun to accelerate again. Volatility has remained elevated during the messy sideways correction but without direction you are merely left with unforgiving whipsaws which punishes pretty TA. Now we are back within parabolic mode, we can sue tighter stops and look for obvious levels to target.

On the weekly timeframe two such levels are 1800 and 1730. The former is obviously a round number which tends to generate price reactions due to profit taking but we also have other technical reasons to consider it as support; 23.6% retracement; October ’14 lows; 200 eMA (although a little lower, actually).

If we are to break below 1800 then 1730 becomes the next level to monitor. This marks the 100% projection; 200 MA; Bullish trendline from 2008 lows. If this level breaks then expect ‘value’ buyers to throw in the towel and journalists with even the most basic of technical analysis skills to hit fever pitch as their trendline broke. For those a little more technically astute, you would have been weighing up short positions after the initial drop from the all-time highs, as I did nearly two months ago.

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