"When misguided public opinion honors what is despicable and despises what is honorable, punishes virtue and rewards vice, encourages what is harmful and discourages what is useful, applauds falsehood and smothers truth under indifference or insult, a nation turns its back on progress and can be restored only by the terrible lessons of catastrophe." … Frederic Bastiat

Evil talks about tolerance only when it’s weak. When it gains the upper hand, its vanity always requires the destruction of the good and the innocent, because the example of good and innocent lives is an ongoing witness against it. So it always has been. So it always will be. And America has no special immunity to becoming an enemy of its own founding beliefs about human freedom, human dignity, the limited power of the state, and the sovereignty of God. – Archbishop Chaput

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Monday, August 8, 2011

S&P 500 Technical Analysis

Based on the monthly chart, the S&P has rallied to precisely the 75% Fibonacci Retracement Level and has now failed at that point. One would then expect the market to drop lower and test the next retracement level (61.8%) which it did - and promptly failed there. Following that breach of support, the next move lower should then be expected to test the more significant 50% retracement level. Note that it has currently broken below that quite significantly. Bulls now have their back firmly to the wall and will need to perform here, or else.

If the market cannot rather quickly regain this level, which comes in near the 1126 level, technical analysis tells us that it should then fall down towards the 38.2% retracement located near 1018. Interesting enough, that level corresponds very closely with horizontal support located in that same general vicinity with a swing low right at 1000.

As we move forward, IF, the market were to fall below both the 38.2% level and the 1000 level, it would portend some very serious losses in the broad equity markets and set things up for a drop towards 900 - 896.

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