Friday, June 8, 2007
Prediction: ABC Correction on S&P 500 (6/7/07)
Prediction: Current S&P 500 Market will Correct and undergo an ABC Correction. Current resistance is the 50 day moving average at 1487. But based on market behavior, this resistance might not hold. There is a lot of buying volume between 1430 and 1460, and those who bought during that time might get worried and start taking profits now or on any rally.
The 50 day moving average should get taken out, and maybe hesitate at the 38.2% retracement price of 1477. However, better support will probably be at around 1457-1460 since previous buyers used to be at that level. This is the A-wave.
Buyers at the 1460 bring the price up back to the 38.2% retracement price of 1477, the B wave.
Then we finally get the C wave, and go down all the way to the 61.8% retracement level at 1437-1440. Sellers will be exhausted, and there is previous buying interest at these levels and we near the bottom.
In addition, I'll be watching another indicator, the $SPXA50R, the percent of S&P 500 stocks that are ABOVE (chart annotation says below. The chart annotation is wrong) the 50 day moving average. Previous history has shown that when this amount goes below around 30%, we are near the bottom. We are not there yet.
I used the tools at StockCharts.com
The idea of using $SPXA50R is thanks to Matthew Frailey at www.breakpointtrades.com .