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Thursday, January 8, 2009

Terra Incognita: Something the Market Will Explore Eventually

Yesterday’s plunge in equities should not have come as a surprise. The markets were flashing many warnings signs:

Percent of Stocks Above 50 Day Moving Average: Overbought
Volatility: Stretching Into Oversold
McClellan Oscillator, Super Overbought
Bullish Percent Index, Flashing Warning Signs
Good Start to Year, Beware Bear Wedge

Expect follow through on the downside today as Wal-Mart Cuts Forecast, Markets Cuts Stocks.

SPX: 15 minutes, 1 month

Price closed right on support yesterday. A drop below would accelerate into route down to about 870.

If support between 860 and 870 fails to hold, we'll all find out what the Abyss looks like up close and personal right quick.

SPX: 60 minutes, 1 month

Any bounce would likely fail at resistance between 915 and 920.
There could be some minor support around the 885 area.

SPX: 60 minutes, 3 month

The fall back position that must be held by the last few Bulltards is the 820 area. Failure here would result in a test of the November 2008 lows of 741.

Below that lies Terra Icognita, something the market will explore most vigorously sometime in the first half of 2009.


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