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Midweek SP500 Update for July 7 Favors Retracement
By Corey Rosenbloom   
July 07, 2010

Let’s take a look at the S&P 500 daily chart to see what levels to watch and what to expect going forward in terms of opportunities in the price structure.

S&P 500 Daily:

07/07/10
Click on image to enlarge!


We see the market in a highly probable bounce off the 1,010 level as I wrote last week in the post “Hidden Fibonacci Confluence Support.

I’ve also been posting in the evening in-depth updates to Idealized Trades members that intraday higher timeframe charts have been showing clear positive momentum divergences as well as strong breadth divergences on the test of 1,010.

We are now seeing the expected bounce materialize.

The question now is “How far will the bounce go?”

We have already hit – twice now – the expected overhead short-term price target at 1,040, so that is no longer in play for an upside target.

The 1,040/1,050 level remains ‘token’ resistance within the context of the upswing, but we could certainly see price rally further to test the underside of the falling 20 day EMA at the 1,065 level.

Using simple charting, we would expect to see 1,065 if buyers can trigger a wave of “Popped Stops” (from nervous bears) on a clean break above 1,045.

Keep in mind that 1,044 is a Gann Squares price level to watch. The Gann level above 1,044 is 1,077 which is between the 20 and 50 day EMAs.

Nothing will change the trend structure of lower lows and lower highs except an unexpectedly powerful bullish rally that breaks above the most recent swing high at 1,130 – that is the only outcome that would challenge the current downtrend structure. A break above 1,050 will not change the structure.

Keep watching these levels as the market rally materializes on the daily chart, and be on alert for any intraday divergences or signs of reversal ahead of these targets.

For more daily updates from Corey, visit his blog at Afraid to Trade.com

 

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