SPX & NASDAQ: Support Levels

The market currently is called gap down at the open, so unless the futures should stage a huge rally (very unlikely), the SPX will gap down below the Symmetrical Triangle (pattern in blue), the bottom of which comes in today at 824.20.

The low of the little candle on January 13, circled in red, was a trendline validation, meaning that it was the third hit to the trendline telling us, "Yes, that IS support!" As we've observed so often, those trendline validations usually have some significance, especially when they're part of a pattern, as this one was. It was the low of the Ascending Triangle (pattern in purple) that had a Breakout/Fakeout that ended in a Bearish Wolfe Wave #5 Fakeout/Breakout in the Hourly Chart, which we discussed the morning of January 6.

That validated trendline not only was significant when it broke to the downside, it also was significant at the SPX 877 and 875 highs of the current Symmetical Triangle (Blue #2 and #4). The first rally got through the trendline by a hair; the second rally got refused just about smack on the purple trendline, which became validated resistance telling us, "You aren't getting through there." Confirmation of that is when a pattern gets broken to the downside, or when a new low is made. We'll get the former at the open and if the 804.30 low of the pattern gets taken down (Blue #1), that's further confirmation.

One last thing: Notice that the bottom of the Symmetrical Triangle had been violated by about 15 points on Thursday afternoon at the Obama Stick Save. Let's look at that candle in this NASDAQ chart:



The Obama stick save was an exact trendline validation (less than fifty cents) of the bottom of the Rising Channel/Bear Flag. The weaker SPX was acting sloppy, but the stronger NASDAQ nailed that trendline, telling us, "Yes, that IS support." We know from the example of that little red candle in the SPX chart (January 13) to be careful when a validated trendline ISN'T any longer support.



In the Ichimoku Kinko Hyo chart ("At A Glance...The Table of Balance"), we can see that the NASDAQ has been trying to turn the corner and get above the Kumo (Cloud)resistance, represented by the vertcal lines, and begin to trend higher. The current Rising Channel/Bear Flag wouldn't appear to augur well for that occuring, but we know that anything can happen in the stock market.

If the SPX breaks the 804.30 low of its Symmetrical Triangle, it could "bounce out of nowhere" like it did on Thursday afternoon at the Obama stick save if the NASDAQ finds support at/near:

1. 1504.56 - Bottom of the Rising Channel/Bear Flag, which is a validated trendline.
2. 1488.17 - The trendline off the November 21 low.
3. 1480.55 - The bottom of the Kumo (Cloud).