Fragile Support

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On Wednesday, the S&P posted its third straight gain with a rally of 0.1%. It could have been better, but a sharp final hour sell-off erased most of the day’s earlier strength. Even though the index finished on the plus side, both breadth and the up/down volume ratio were negative. Moreover, total volume increased. So, even though the index suggested that Wednesday was an “up day,” it was essentially a “down day.” The daily Coppock Curve has a bearish bias for 22 of the 24 S&P industry groups.

S&P 1500 A-D Line

The “conundrum” between the hourly and daily charts that we spoke of recently has disappeared. Both charts suggest that the decline from mid October to early November was a five wave pattern. Given the non-Elliott evidence (i.e., poor on-balance volume, a 22-week cycle top, overbought and deteriorating momentum, and excessively bullish sentiment), this five-wave decline is likely the first leg of a larger correction.

If so, the recent 1029 low will not hold up, which may mean that the October 2 low at 1020 is fragile support. That is important because a break of that level will signal that the rally from the July lows is over. Below that, 1013 is a 38.2% retrace of the July-October rally and 985 is a 50% retracement. But, as explained in recent posts, more important support may be seen at 958-935 and 884-869.

Nearby resistance is at 1061-1067.