The red line is from a recent swing low that may be weak support but it is not as important as the yellow line from the 2009 lows. A strong move is in the works the real question is when and which direction. The labour day is this weekend so alot of people are calling that the market will remain flat this week.
Over all I believe this market is going drop, however, I am opened to the possibility that there could be a bounce. There are many elliot wave counts that can make the argument that we are entering hell, and others that say we could have a medium size bounce and others say we are going to take out the highs in 2010. So with all the talk about QE2.0 i have added to my metals position and lighted up my core short on the s&p.
One note about the Fib levels that are the horizontal dashed lines. July 2009 we found support at the 38.2% retracement level, then resistance at the 50%. The the 2010 July low look where support was found, perfectly on the 61.8% retracement level. So my target for the S&P is based on the 50% retracement which comes in at around the 950 mark. Any breaks below that I would consider the 38.2% as the place the market will bounce hard again.
The close up of current price action is as follows.
I have had to redraw this blue line a couple of times since i have used 3 computers in the past week to do blog posts but the line has not been altered and look how well it has come into play. Strong resistance but sandwiched right now at the 1040 level. That level has now been tested 3 times (today's low was: 1040.88). If the market is to remain flat for the week it would stay in between the cyan and purple line, which if the 1040 is broken, things will move quick to the next major support which I think will clearly be that 61.8% retracement the 1010 level, and obviously the 1000 is a strong psychological level. Breaks above this could rally to the 1080 level when it comes into the 50 and the 20 moving average.
The next 7-10 trading days will be very interesting.
Lets look at a trade I have entered for a gold / silver play.
http://www.sabinagoldsilver.com/s/Home.asp
The stock ticker symbol is SBB on the TSX.
I have featured this stock before because of its very bullish chart.
My entry was at 3.31 which was the lowest the stock has opened or closed at in 5 days, and today a nice bullish continuation candle stick was formed with strong volume behind it with 125,000 more shares exchanging hands.
Some of the other reasons this trade was made is that 2 other companies I follow AXR and FR both were very strong the past 5-6 days. This made sense because silver is now trading at close to 19.30. However, this normally strong strong was remaining flat. When SBB caught up to the silver bullishness my feeling is that a potential top would be around the 3.91-3.93 area. With resistance also coming in at the 3.68 area. I would consider taking profits in these areas however it depends on where silver is trading. If silver continues to break out I will just trail a stoploss behind the stock. From a longer term chart this stock has rallied 4 times and has consolidated through time by just chopping sideways for a week or 2. I believe this is the current case and we will see new highs over the next month.
I did get into a platinum play today
As you can see the stock price is currently sitting on the 20 / 50 MA and is ending a wedge in this triangle. There was healthy volume today compared the last few weeks. And the Techincals are pointing to a turn in momentum. If this can break through that 200MA could be resistance.
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