$SPX 1178: The Line in the Sand

By Lawrence G. McMillan

The market opened stronger, after some economic data was released, and that rally lasted for less than a half hour. Since then, its been a slow decline, but a large one, and the support at 1180 is in danger of giving way. This would not be good. Specifically, a close below 1178 would spell then official end of this short-term oversold rally that has been underway for the last few days. Thus, the $SPX chart remains in a negative downtrend.

Breadth is only modestly negative because of the strong opening, but it is weakening now, and unless there is a rally later today, it is highly likely that the recent buy signals from the breadth oscillators will be canceled out.

Volatility indices are not responding, though. $VIX is up 30 cents, near the high of the day, but hardly a resounding confirmation that the current bout of selling is aggressive. $VXO is actually still down on the day.

This type of action will not help the put-call ratio generate buy signals, of course, and they remain bearish.

In summary, if $SPX closes below 1178, the bears will be in complete control again, and aggressive long positions should be closed.

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