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The downtrend continued yesterday, and on the SPX daily chart the middle bollinger band was tested. If this is just a retracement, or the decline so far has been the first part of a topping pattern, then this is the obvious bounce level. On a break below here, rising channel support, the lower bollinger band and the 50 DMA are in the 1365-70 area and that would be the obvious next target:
There were a couple of developments yesterday that could be very important game-changers. The first from the Fed minutes is serious talk of implementing QE3 if the US economy continues to weaken, which seems likely. QE1 and QE2 both had a big impact on the equity and other markets and there's no reason to think that QE3 wouldn't have a big impact too.
The second was that the German representative on the ECB came out against the Bundesbank in favor of a European QE program that would buy up the bonds of troubled sovereigns as soon as the yields reached certain trigger thresholds.
SPX continued the slow low volume grind up into the end of the week. ES has so far ground up a little further overnight. SPX came within 4 points of testing the April high on Friday and I think there's a very good chance that that will be exceeded and the 1440 area SPX pivot will be tested. I was talking about the technical significance of that test in my weekend post at MarketShadows which you can see here. In the meantime I have short term trendline support in the 1405 and 1398 areas, and on a break below those the daily middle bollinger band is now at 1386:
We're on a road to nowhere come on inside. Takin' that ride to nowhere we'll take that ride. Maybe you wonder where you are I don't care. Here is where time is on our side take you there.
From the US Federal Reserve's website and the sub-section The Federal Reserve's Response to the Crisis:
