SP-500 continues decline to 1045.50 but what next?
ByI wrote on the 21st January & 27th of January forecasting market decline in the short term outlining the following scenarios.
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We essentially have 5 scenarios
1. Today’s negative action halts today and builds a base at the intermediate support line
2. We experience further downside action to the medium term support line at 1072
3. We pullback to 38.2% of the July Trend (6 months)
4. Pull Back to Fibonacci 50, at 1015
5. Experience quite a serious correction releasing the tension of the March to date rally with a pull back to 980.
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Of those 5 scenarios I suggested 2, 3 and 4 were the most likely.
So what happened?
1. Today’s negative action halts today and builds a base at the intermediate support line
2. We experience further downside action to the medium term support line at 1072 – Downside Target hit – 4th February 2010
3. We pullback to 38.2% of the July Trend (6 months) – Downside Target hit – 5th February 2010
4. Pull Back to Fibonacci 50, at 1015 - This could still potentially happen Wordens TSV & MoneyStream indicators are still in a negative divergences, however RSI 14 is starting to look positive.
5. Experience quite a serious correction releasing the tension of the March to date rally with a pull back to 980 – 1000 is a strong psychological support & resistance level for the S&P500, I would not expect a break of this line today. However if this was broken we may see considerable decline thereafter.
In this chart you can see that RSI is starting to show a slight positive divergence, while TSV is confirming the downtrend by remaining negative. The move down also occurred on higher volume, which as we know a move down on higher volume is very bearish.
TeleChart2007 chart courtesy of Worden Brothers, Inc.
The market participants are not sure where to go from here. I have seen no clear sign of a change in trend to the positive side. Be careful with your trading until we get a clear signal that this decline will reverse.

Name: Barry D. Moore
Bio: Certified Technical Analyst (Stock Market Technical Analyst), Full Member of Society of Technical Analysts (STA) Level II CFTe (Certified Financial Technician), independent trader, author, trainer & blogger.
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