SPX got within one point of the 8/28 low and staged a miraculous recovery into the close. The bulls are clearly defending the lows. What is missing is rally chasers. Every bounce just ends up fizzling out. We are still in the range of the last two days so the market has not made a decision whether to bounce or break down from here. I would think we will find out early next week. I saw several traders on TV mention they are watching that 8/28 low for SPX of 1627. I suspect there are quite a few stops just below there. Should we end up breaking down I think the market will accelerate towards to the 200 SMA. Lets take a look at the weekly SPX chart for a change.
The weekly chart closed below the 18 SMA for the first time since last Nov. With the exception of the week of the flash crash SPX has continued down the next week after a close below the 18 every time in this bull market. The flash crash was an unusual event and you might recall there was a big news announcement out of Europe about some plan to save Greece. Even though the market bounced the week after that cross it then rolled over and went quite a bit lower. Unless there is a great news event next week the odds should be for more down side.
Have a great weekend all.
Bob
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