In focus: Support gives way

By Lawrence G. McMillan

Since early June, the stock market — as measured by the Standard & Poors 500 Index SPX had remained in a steady uptrend channel. On Tuesday, however, SPX not only broke down below the lower band of that bullish channel, but also violated previously strong support at 1,425-1,430. That was a bearish action, and it is also accompanied by sell signals from many other technical indicators.

Now that the 1,430 level has been violated, it acts as resistance. Meanwhile, there is tentative support at 1,395 (the August lows), but there is a potential danger in always looking for the next support level, lest one never actually sell. So, this breakdown in the SPX chart is bearish, and if 1,395 is broken, that would be even more intermediate-term bearish...

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