S&P 500 Morning Analysis 8/12/09

The SPY broke the trendline outlined yesterday and dropped down to its first important level of support at 9940 which it held above. The market is now below the declining 5 DMA and is showing a pattern of lower highs and lower lows, for now we want to treat it as in a short term downtrend and will look for the next levels of potential support if 9940 fails today. The next levels where support should be found are 98.50, 96.70 and the biggest level is approximately 96.00. The purple line shows the VWAP from the July low through yesterday and that (moving) level is likely to be defended by bulls. 96 is also a prior level of important resistance and the location of a 38.2% retracement of the rally. I will discuss this further at 11AM Est live on www.stocktwits.tv