Technical Commentary

August 7, 2009 (FinancialWire) (By Frank Kollar) — Two weeks ago we wrote that the S&P 500 SPYDRS (NYSE: SPY) and S&P 500 Index (SPX) were nearing resistance levels that could stop this strong rally. Both indexes are now slightly above these levels and just holding on.

The S&P 500 SPYDRS topped the 50% retracement resistance level, at $98.80, for their August 11, 2008 to March 6, 2009 decline.

The S&P 500 Index topped the 50% retracement resistance level, at $987.47, for its August 11, 2008 to March 6, 2009 decline.

We wrote the 50% retracement was very likely to slow down, or even stop the advance. This is exactly what is happening as two days of selling have certainly slowed down the rally.

But on both days the stock market was lower intra-day and moved higher into the close, though not reversing all the day’s losses. This is what happens when profit taking hits. There are buyers trying to catch the lows. In the next day or so they may find it and the market could resume its upside March.

How high? For the S&P 500 SPYDRS this is at $106.22. For the S&P 500 Index it is at 1063.59.

If we do move lower, initial strong support should be found around SPX 848 which is the 50-day moving average for this big cap index (for the SPY the 50-day moving is at about $85.00).

The http://www.fibtimer.com ETF Strategy has a position in the S&P 500 SPYDRS.

The FirstAlert(tm) Economics Calendar lists Employment Report for July (8:30 a.m.), Consumer Credit for June (2 p.m.).

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Quote of the Day: “The dance is a poem of which each movement is a word.” Mata Hari

Today is: Purple Heart Day.

Happy Birthday: Guillaume Dufay, Billie Burke, Don Larsen, Garrison Keillor, B.J. Thomas, David Rasche, David Duchovny, Charlize Theron, Cirroc Lofton.

Today in History: George Washington ordered in 1782 the creation of the Badge of Military Merit, later renamed the Purple Heart, to honor soldiers wounded in battle. Whiskey Rebellion begins: Farmers in the Monongahela Valley of Pennsylvania rebelled in 1794 against the federal tax on liquor and distilled drinks. Thor Heyerdahl’s balsa wood raft the Kon-Tiki, smashed into the reef at Raroia in the Tuamotu Islands in 1947 after a 101-day, 4375-mile journey across the Pacific Ocean proving that pre-historic peoples could have traveled from South America. The United States launched Explorer 6 in 1959 from the Atlantic Missile Range in Cape Canaveral, Florida. The Washington Star ceased all operations in 1981 after 128 years of publication.

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