If the S&P 500 cannot retake 922 and make it support, then more bearish prospects reappear

In this post, Divergence appearing in the predictions by different technical analysis methods now making us more alert as shown in these charts (Sat., 6/27/09) included an hourly SPX chart (copied in below) with Fibonacci levels marked on it. The fact that this morning's high was almost exactly on the .618 retrace level of 930.49 is a warning that this morning's high may have completed an Elliott Wave 2 up. And even that this morning's drop may have been the first wave down in whatever movement is to follow. If you have been tracking the Elliott Wave possibilities, you know that one is moderately bearish (perhaps a pullback to about 850 in SPX), the other is very bearish (retesting the March lows, with the further possibility of seeing 400 SPX). If the SPX cannot get strongly above 922 (a small .618 retrace level for a second wave up from the intraday drop, if it was a first wave), this will be quite bearish. We were expecting some movement higher the next two days - and perhaps, even in these bearish scenarios, that could still happen. But investors and traders should keep a keen eye on whether the SPX can get to and above 922. And certainly, on whether it can remain above the low already put in today. If it cannot remain above today's low then it would look like the more bearish scenarios are coming into effect.

There still is another level to watch. SPX 904 could be a support area, underneath 912. If you look at the SPX price channel chart I posted earlier today, you can see that 904 would break the lower channel line, but since it's a .618 retrace to last week's low, it could theoretically be a level that gives support on a retrace pullback.

Falling under last week's low will be widely viewed as bearish (the head and shoulders scenario), so these are some levels to watch in the meantime. By the way, Tony Caldaro mentions in his OEW update this evening (links at right) that today's 930 high is also the level the "left shoulder" had reached ... so the index has some real work to do, to avoid the bearish scenarios. **Update Note: Tony also states, the 927 level is the one SPX really needs to mount, to get back into a more bullish outlook.** The cycles view might be more optimistic, but cycles can "fail" by cresting early when markets are in bearish mode. So for example, keep considering them for timing but don't forget they don't guarantee price levels. We'll have to see whether or not the new month, new money and holiday approaching the next two days can either turn positive or at least postpone more immediately bearish market prices.

(remember the chart below is from Saturday, just to restate the Fib levels and swing trade context)