Technical Talk: Is S&P 500’s price reversal significant?
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September 25th, 2009 by Prieur du Plessis, Investment Postcards from Cape Town
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The comments below were provided by Kevin Lane of Fusion IQ.
Yesterday’s intraday sell-the-Fed-news price reversal on the S&P 500 stalled at the area (S&P - 1,079 to 1,106 area) where the index really accelerated its 2008 sell-off (red dotted lines). This area is likely to be more difficult to overcome and may take several attempts, and thus may cap the rally a bit while the index marks time and pulls back slightly or enters a higher level trading range.
While we believe liquidity and buying power remain strong and thus pullbacks should be relatively shallow in nature, that doesn’t mean we can’t get a corrective wave of some magnitude before this sideline liquidity is redeployed. Additionally, quarter-end window dressing may keep stocks elevated or from slipping too much. However, we do believe that putting new money to work in front of this more significant resistance level poses risks. Initial support below the current S&P levels comes into play near 1,040 level (green line).
Secondary supports if 1,040 were to give way would come into play near 980/975 then 950.
Kevin Lane, Fusion IQ, September 24, 2009.
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Dr. Prieur du Plessis is an investment professional with 26 years' experience in investment research and portfolio management. More than 1,200 of his articles on investment-related topics have been published in various regular newspaper, journal and Internet columns, including his blog, Investment Postcards from Cape Town. He has also published a book, Financial Basics: Investment. Prieur is Chairman and principal shareholder of South African-based Plexus Asset Management, which he founded in 1995. The group conducts investment management, investment consulting, private equity and real estate activities in South Africa and a number of foreign countries. He also serves as Honorary Consul of Slovenia for South Africa, actively developing economic, cultural and scientific relations between Slovenia and South Africa. Prieur is 54 years old and live with his wife, television producer and presenter Isabel Verwey, and two children in Cape Town, South Africa. His leisure activities include long-distance running, traveling, reading, motor-cycling and scripophily. Read more from the author/contributor here.
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