SPX, INDU: Bulls Face Their First Real Test

By Jason Haver  OCT 12, 2012 8:55 AM

1425-1430 SPX is important support.

 


MINYANVILLE ORIGINAL  Last update expected the S&P 500 (INDEXSP:.INX) to test the 1425-1430 support zone, which is what's happened since.  This is now the first real test of the intermediate bull case.  My preferred expectation has been that this decline is part of an ongoing correction, and as long as the 1425-1430 zone holds, it should resolve with new swing highs.
 
One more marginal new low here would be okay for the bull case, but a solid breakdown of this support level is likely to lead to a 30+ point decline.
 

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The next chart outlines some key levels for SPX.
 

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Finally, one can't help but notice the similarity of the current fractal with the April top earlier this year.  If bulls somehow fail to hold key support here, that probably foreshadows a repeat performance.  
 

Click to enlarge

In conclusion, as long as the bulls hold this expected test of support, the market is likely headed to new swing highs.  This is where fractal analysis can be a bit tricky to project too far out though, because the current wave down may only mark wave i-down of a larger (c) wave down.  This is not my current expectation, but I'll watch the shape of the next rally and note the key levels as it unfolds.  Trade safe. 
 
No positions in stocks mentioned.

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