SPX Support, Resistance (S/R) and Moving Averages for Trading the Week of 11/12/12

SPX support, resistance, moving averages and other important levels are highighted below. The 1422 area is a sturdy ceiling.  The 1403 level highlighted here for the last month finally gave way this past week.  Then the floodgates opened as was expected. The 1403 level is the Draghi put where the ECB's OMT bond-buying program was announced in early September providing a floor in the markets.  Spain will not request a bailout, however, so the ECB QE program is impotent. Traders gave up waiting for the bailout request to occur and are now selling the markets.

The 1391 level is very strong S/R so the bears have juice under here, and the bulls punching above 1391 would be a strong rally signal that will likely send the SPX back up to back test the 1403.  When price fell this week, a bounce occurred off the 10-month MA so that deserves respect. The gauntlet at 1381-1386 which envelopes the 10-month, 150-day and 200-day MA is very critical and when price fell thru all three levels that was a significant bearish development.  On Friday, price came back up thru as the bulls tried to stage a come back, but the SPX tumbled back down thru to close under this 1381-1386 gauntlet as the week ended. This is bearish action.

The 1378, 1375 and 1373 support levels all played a role in Friday's action.  Keystone's 12-Month MA Cross Indicator represents the edge of the waterfall, if 1469 is lost, it becomes very likely that the markets can drop into free fall, going over the falls. For Monday, starting at 1380, the bulls must push the SPX above the strong 1391 resistance, if so, the rally will likely continue to 1403.  The bears must push under 1373 and a downside acceleration will occur.  If 1373 fails, price will likely fly off the edge of the waterfall at 1469-1470 in quick order, then it is simply a matter of what support level tries to catch the collapse, perhaps 1366, 1362.00-1363.61 or 1358.  If 1358 fails the next major support level is 1345. 

On Monday, watch to see if price bounces off the 1370-1373 area to begin an upside rally move.  If price falls thru 1373, the markets are in trouble and going much lower. Two scenario's would be in play; first, a waterfall crash move a la August 2011, where 50 or more handles can disappear in a heartbeat with extended weakness on tap, or, the collapse will result in a false breakdown scenario.

The False Breakdown Scenario; the 1373 would give way leading to the 1369-1370 failure and markets sailing off the cliff.  The move lower, however, under this false breakdown scenario, would be sharp and quick and result in a sharp and quick recovery, say, a drop that immediately bounces from 1366, 1362, 1358 or other support level. This move will be very fast, if you are watchng the screens and get up for a coffee or tea, and visit to the can, by the time you come back it may have already happened.  Look back at previous market bottoms and you will see the intraday spikes lower that mark a false breakdown. This is why all your homework for deciding potential long plays must be finished this weekend so you have plenty of choices to play on the long side.  Once price loses 1369-1370, the move down, either waterfall scenario, or false breakdown scenario, will be fast and harrowing.  If price maintains 1373 support, all of this is moot point, the markets will bounce, for now. If 1373 fails, good luck to all since carnage is about to begin. The way that the utilities sector led the markets lower for the last three months, the weakness in copper, the Dow Theory non-confirmation with the Trannies, Keystone's cyclical bear signals now triggering, and other indicators, hint that the break of 1373, then 1369-1370, would lead to a waterfall crash like August 2011. Then, once price plummets and panic sets in, the false breakdown move can occur at a lower place such as 1343, 1337, 1331, 1326, or lower. It proves to be an exciting week ahead and with higher volatility the point swings in the broad indexes are going to become more violent. Higher volatility will mean trader heaven to finish out the year.

·         1451

·         1447

·         1446

·         1444

·         1441

·         1440 (5/19/08 Intraday HOD for 2008: 1440.24)

·         1438

·         1435

·         1433.50 (50-day MA)

·         1433

·         1431

·         1429

·         1426 (5/19/08 Closing High for 2008: 1426.63)

·         1424

·         1422.61 (200 EMA on 60-Minute Chart a Keystone Turn Signal)

·         1422.00 (20-day MA)

·         1422

·         1419

·         1416

·         1413

·         1409.41 (20-week MA)

·         1409

·         1407.64 (10-day MA)

·         1406 (5/29/08 HOD)

·         1404

·         1403.24 (100-day MA)

·         1403

·         1401

·         1399

·         1397

·         1394

·         1391.39 Friday HOD

·         1391

·         1388

·         1386.31 (10-month MA)

·         1385

·         1384.62 (150-day MA; the Slope is a Keystone Cyclical Signal)

·         1380.98 (200-day MA)

·         1379.85 Friday Close – Monday Starts Here

·         1378

·         1375

·         1373.03 Friday LOD

·         1373

·         1371(5/2/11 Intraday HOD for 2011: 1370.58)

·         1370

·         1369.43 (12-month MA; a Keystone Cyclical Signal)(cliff edge)

·         1369

·         1366

·         1364 (4/29/11 Daily Closing High for 2011: 1363.61)

·         1363.22 (50-week MA)

·         1363

·         1362

·         1358

·         1357

·         1355

·         1351

·         1347

·         1345

·         1344

·         1343

·         1341

·         1338

·         1337

·         1335

·         1333

·         1331

·         1329

·         1326

·         1324

·         1321

·         1319