Wednesday September 22, 2010 - 19:43:04 GMT
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E-mini S&P Support Beginning to Erode
Support in the December E-mini S&P 500
is beginning to erode as investors begin to take profits following the recent
rally from 1032.50. The lack of
follow-through to the upside and the subsequent sell-off following Tuesday late
afternoon surge is weighing on the market today.
The catalyst behind todayâ€™s weakness is
lower technology and banking stocks, but the main reason for the decline has to
be the Fedâ€™s assessment of the economy.
Fed monetary policy statement made investors face the reality of the situation
that there is still a lot of negative news in the economy. In its statement, the Fed hinted that it is
gearing up for another round of economic stimulus because the economy was not
moving forward at a suitable pace.
assessment of the economy may have made investors feel that the recent rally
was too optimistic given current economic conditions.
Tuesday, the E-mini S&P 500 made a closing price reversal top on the daily
chart. Overnight this pattern was confirmed, suggesting that a sharp break was
in the works.
type of pattern usually suggests the start of a 2 to 3 day break with 50% of
the last rally its next objective. Based on the range of 1032.50 to 1044.00,
this retracement level is 1088.25.
break may appear labored at first, however, as the market has to chew through a
Fibonacci level at 1128.00 and a pair of old tops at 1124.50 and 1122.00. Once
these levels are cleared, minor points like last weekâ€™s close at 1119.75 and
this weekâ€™s low at 1117.00 are likely to be taken out fairly easily, taking the
market to the uptrending Gann angle at 1008.50.
Fundamentally and technically the equity
markets appear stubbornly weak, but if sellers canâ€™t exert enough pressure to
break through the old resistance/new support levels, then we could be looking
at a number of days of sideways trading.
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