Tuesday, March 3, 2009

Key Price Levels: March 4, 2009

Support.....what support? There are no nearby support levels when it comes to the S&P Depository Receipts (symbol: SPY) or the Diamond Trusts (symbol: DIA). Even the October, 2002 levels are in the rear view mirror.

Please review the methodology and the significance of the key price levels by clicking on this link.

A weekly cart of the SPY is shown in figure 1. The breaks below these key support levels has led to accelerated selling such that the October, 2002 low (horizontal pink line) at 77.07 was easily taken out. The increased selling pressure is most likely accentuated by the lack of nearby support levels. Prior support at 77.07 now becomes resistance, and note how this area of resistance coincides with the lower part of the trend channel where the SPY broke down. If stocks were to gain some traction - a big IF indeed- I would expect the SPY to retrace to this breakdown area before selling ensued again. From current levels this would be about a 10% pop.

Figure 1. SPY/ weekly

A weekly chart of the DIA is shown in figure 2. Like the SPY, the Dow continues it move lower with no chart support in sight. The pink horizontal line represents the October, 2002 low at 71.81. If a sustainable bounce were to develop, 78.50 is the main resistance level. This is a little more than 15% away from the current price.

Figure 2. DIA/ weekly

Figure 3 is a weekly chart of the Power Shares QQQ Trust (symbol: QQQQ). The QQQQ is our "best" performer as it still remains within the trend channel, and prices remain above the 2002 lows. However, if prices close the week below 26.98 (and in particular 27.63), I would be very cautious as we could see accelerated selling in the QQQQ.

Figure 3. QQQQ/ weekly

Figure 4 is a weekly chart of the i-Shares Russell 2000 Index (symbol: IWM). Last week, IWM closed outside the trend channel and below any visible means of support between 40.73 and 42.48. This is new resistance. Like the SPY and DIA, IWM should see accelerated selling and should be visiting its October, 2002 lows at 32.30.

Figure 4. IWM/ weekly

1 comment:

TraderMark said...

Thoughts on copper, my friend?