JTH

Putting my Bear hat on.

This is the master chart I use to view the overall heath of the S&P 500. From appearances this chart is telling me this is the strongest pullback we've seen since the March lows. This has me putting my somewhat dusty bear hat back on and heading to the defensive G-Fund EOB Monday.

On the candlestick chart I've outlined what I believe to be key areas of support based on price, and two Fibonacci levels. A break (& 2-day confirmation) below each level of support will lead me to believe we will test the next lower level. I'm drawing the 1014 (38.2% Oct 07 - Mar 09) as the line in the sand. Howver, the good news is with a still rising 200 SMA, we may get support if price intersectes with this indicator at 1030-1035's support level.

For Volume I've drawn in a descending trendline based on volume's 20 SMA. We can see January saw an increase of volume with a decrease in price. As you know this has been typical since the March lows were put in. The good news is volume's 20 SMA is going to test that trendline again. If the trendline holds and volume declines, then we can expect price to start rising again. If the trendline breaks I'll see this as a huge warning of lower prices to be had.

The white ADX trend strength indicator has risen to new highs breaking above 25. While the red negative indicator has dropped a little, the green positive indicator is still falling, matching levels we saw in March 09. I'll believe we've put in a possible swing low when the ADX starts heading down again.

The slow 39, 1 stochastic has surpassed the lows in Nov & Oct and is testing the lows we put in July. Excluding the minor fake out, we've had 6 days under 20, and this is telling us price momentum is increasing to the downside. For me, it will be equally important to see where this indicators next swing high will be.

I probably haven't shown you the Elder Bull/Bear indicators before. It's really a neat indicator that uses the magical 13 EMA and add/subtracts from the days high/low. This paints an easy to read picture of the strength of the Bull/Bears and who's winning the battle. Look at what happened to these indicators at the tail end of January. This is the weakest we've seen the Bulls and the strongest we've seen the bears since March 09. It's indicators like this that help you to identify when the fundamental market picture is changing. Bottom line, if you haven't already shifted to cash, you may want to start thinking about it...

Take care... Jason