S&P 500 Chart – July 10, 2009

I charted the S&P 500 (SPX) after the markets closed on July 10, 2009 when it closed for the week at 879.13.  I drew a thin line to show the closing price and how that same level has been a key resistance and support level a handful of times over the past six months.  The SPX dipped below that point two of the past four days, but managed to edge back up both times to stay above.  The other two days used it as support.  The could be a sign that this 880ish level is starting to crack or that we were close enough to holding support that we’re nearing a support level.

That’s how a lot of the indictors look to me lately.  We’re borderline support versus breaking on a few.  The 20 day simple moving average (sma) broke a few weeks ago and then acted as resistance.  The 200 day sma broke and the SPX keeps trading back and forth over it without being able to pick a true direction.  Friday closed close to dead on it.  The next level down could be the 100 day sma which acted as support a couple of times in April.  The 200 day sma also happens to be hovering near the 850 line and for some reason the round numbers like 800/850/900 mean something to some traders and make them worth watching more closely to all of us.  Those two together give the 850 line a little more power, especially since it would put the SPX down just over 10% at that point which could be enough for some investors to take their chances.  we might just luck out enough to see the 100 day sma come up to act as support right at the 10% down mark and that would be pretty strong support I expect.

The current trading channel is showing further losses on their way, but then again the SPX is at the bottom of its trading range.  That could mean we could see it trade sideways if not up for a couple of weeks before hitting resistance at the trend line of lower highs.

Volume remains weak as I’ve been saying for a while.  The big indicator that might point a direction for us soon is the Williams %R.  I used the 14 and 28 day indicators below.  Both show the SPX is oversold and as we’ve seen in the past, it can stay there for weeks on end.  The key to watch for it now is when both the 14 and 28 day indicators move out of the gray area and push higher for two strong days or preferably three straight days up.

I’m still nervous about putting too much more money at risk at these levels even though the SPX is off its highs by around eight percent.  With earnings season rolling through and options expiration five days away, this week should provide plenty to watch.  I just might do more watching from the sidelines than in the game.