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Aug 20th, 2010: Update 2 – Morning

Posted by pugsma on August 20, 2010

12:05 pm EST:  Today’s SP-500 drop reminds a lot of the July 16th OPEX expiration where there was a big SP-500 drop and the VIX did not confirm the drop.  Same thing is happening with the VIX today.   The VIX is flat to down all day with the SP-500 off up to 11 points (-1%)Of course the July OPEX bottom near 1057 led to the explosive rally to 1129 by early August.

On the bearish side, if you look at June 28th/29th, when the SP-500 hit this 1067 area, it broken down from this area and completely tanked all the down to 1011 by July 1st.

We have talked about the 1057, line in the sand, for the bulls, for the past week.  It’s beeing tested today.

FYI, the Russell-2000 at 602 is within 12 points (-2%) of taking out the July 1st low of 590.

11:40 am EST:  There is a potential bullish falling wedge that could allow prices to drop to the 1057 area before we get a bounce up.

SP-500 15-min chart (11:35 am):

10:20 am EST:  We have 5-waves down off the 1100 high and wave v=i at 1066.  There is a potential strong positive divergence with the new low at 1066.48 (vs 1069.49) on both the 15-min and 60-min MACD.   So we do have a potential bottom of wave v-(c) to work higher from.  A potential first target to the upside is the 1086, which is here wave-i ended and where a intra-day gap resides.

Just keep in mind that the 1065 area was just minor support, as mentioned in my pre-market update.  There is still the 62% retrace target at 1056 to watch-out for if this move lower in wave v-(c) continues today.  The 1057 area is a much stronger support than is 1065.

SP-500 15-min chart (10:15 am):

SP-500 60-min chart with MACD (10:20 am):

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