SPX Daily Chart

May as well take a look at the daily chart to complete the series this morning. The blue circle shows the Bernanke put that has already failed. The QE3 Infinity announcement occurred at 1430-1440 and did not provide a floor in the markets. Emperor Bernanke is not wearing any clothes. The red circle is the Draghi put that has placed a floor in the markets at 1400-ish. For a more detailed discussion on this topic, type 'Draghi put' into the search box above. Price is now traveling thru the 1403-1419 support/resistance gauntlet as previously discussed. The red lines show a weak and bleak profile for the indicators which point to lower lows in price desired, especially the dropping MACD line.  The stochastics are oversold and its positive divergence helps to buoy prices and create this sideways action over the last five days.

The price action boils down to trader's trusting the floor in the markets at 1400-ish based on the Draghi put.  If Spain would announce its intention to seek a bailout, the ECB would immediately be able to initiate bond-buying and the bulls will run equities higher. Alas, Rajoy becomes more resolute in avoiding the bailout. In fact, it looks like no action will be taken by Spain until after the 11/25/12 elections, another three or four weeks ahead. When do traders realize that the Spain bailout is not on tap in the coming days? This realization will cause the SPX to fail at 1403, then 1400-ish and head lower, with the Draghi put failing. The only reason that the SPX hangs on in recent days is due to the trust that Spain will ask for a bailout any day. Will this trust disappear?

Small caps and technology lead the markets. During bullish rally times, the small caps (RUT) and tech (COMPQ) will lead higher, the wine is flowing like water, and people are happy since many folks only play the long side of the market. Small caps and tech are now leading the markets lower, however. Both the RUT and COMPQ have already dropped down to test at or near their 200-day MA's and the 20-day MA has crossed down thru the 50-day MA, a bearish signal, for both. The Dow Industrials (INDU) and S&P 500 (SPX) are following the RUT and COMPQ. Therefore, a test at or near the 200-day MA at 1380-ish would be anticipated moving forward. The 20-day MA should also cross down thru the 50-day MA to indicate further bearishness ahead. For the bulls, a back kiss of the 50-day MA will likely occur at some point forward but htis may be weeks ahead. Projection is for lower prices ahead down towards the 1370-1390 area. If the SPX pokes up above 1419, that will verify an upside recovery rally in place but that bounce will likely set up another shorting opportunity. As long as the SPX stays below 1435-ish, the markets will remain bearish for the forseeable future. Major SPX S/R is 1476, 1472, 1468, 1461, 1460, 1446, 1441, 1433, 1429, 1424, this current 1403-1419 zone, 1394, 1391, 1375 and 1370. This information is for educational and entertainment purposes only.  Do not invest based on anything you read or view here.  Consult your financial advisor before making any investment decision.