Despite last night’s rate of change prediction of a possible change, this morning’s poor employment numbers mixed with continuing talk of Greece, Italy, Spain and now even Germany who analysts say may be considering leaving Euro is obviously too much for the market to handle. The market timing technical indicators from last night, in particular the Ultimate Oscillator, Slow Stochastic and Fast Stochastic were correct when they indicated market direction down.If the unemployment picture had improved then it may have been a different picture this morning and perhaps that is what the rate of change was reflecting upon.
The quick break this morning of the 1300 level in the S&P 500 and the fact that it has been retested several times moves support levels lower. The 1300 level in the S&P 500 now becomes resistance. Obviously this year the Sell in May theory should have been Sell In April.
Market Direction Support Levels S&P 500
Next reasonably strong support level is around 1275 which was the October and November 2011 highs.
After that there should be support at 1250 which was the December 2011 highs. The third level of support would be 1200. You can see these in the chart below. 1200 would mark an additional 7.7% decline from 1300 and be getting the S&P 500 close to what is classified as a return to a bear market. I wrote back in April how I felt that the market direction might fall to 1275 before any significant strength may appear. This morning 1275 certainly looks like an easy target to reach.
Market Direction Chart For 2012 Showing Support Levels Below 1300
Market Direction Changer Is Ben Bernanke
With so much bad news and the continuous pounding the market has taken it is interesting that the market direction has not been a lot lower. The next big changer to market direction could be Ben Bernanke. If he starts QE3 that could lead to an uptick in spending and another leg up for stocks. Whether or not he will do QE3 or a mini QE3 is anyone’s guess.
Market Direction Changer is President Obama
No President wants to try to get re-elected when the economy is falling apart and unemployment starts to creep higher. This too could be the summer market direction changer.
SPY PUT Trade Back On
Through all of this I will be continuing with my SPY Put Trade but for others who have less time to commit they may want to embark on adding some bear ETF’s or even the HDGE Active Bear Fund to their portfolios if they have not done so already. I wrote about them in this article.
All in all it could be a wild ride this summer and I am expecting whipsawing in the market direction moves all summer long.