S&P 500 Levels and Analysis for 8/11/10

The market experienced a volatile session on Tuesday and overnight trading suggests the near term uncertainty is still unresolved. The picture remains mixed across various timeframes. The weekly chart (not shown) shows the 113.20 level is still the basis of a lower high, while the 30 minute chart of the last 30 days (below) shows the pattern of higher highs and higher lows has turned more neutral and there is a range of ~111-113 taking its place. The uptrend line was tested again on Tuesday and, like any support, the more times it is tested, the more likely it is to fail to hold up. As I often point out, breaking an upward trendline does not assure a reversal, but it does tell us to be more cautious with longs.

The potential levels of support on Wednesday are ~112.00, 111.45, and 111.00. Below 111.00 there will be bigger issues. The resistance levels don’t seem worth pointing out, but we always have to be prepared for anything… so if 113.20 is taken out, that will be significant and could lead to the next leg higher.

The volume by price bars on the right side of the chart show us where the volume has occurred and since late June (the timeframe shown), there are two big levels which stand out. The volume by price gives us an idea of levels considered important because “price has memory” and the more business transacted at a certain level, the greater the likelihood of that level becoming support or resistance. The first level which stands out is approx 112.75-113, that level can be viewed as a larger level of potential resistance because more buyers got “trapped” up there and they may be looking to get out at breakeven if given the chance. The larger level of potential support is found down near 109.50-109.25.