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- Technical Market Commentary -

May 21, 2010 (FinancialWire) (By Frank Kollar) — Both the S&P 500 Index (SPX) and its tracking ETF the S&P Deposit Receipts (NYSE: SPY) plus the Nasdaq 100 Index (NDX) and its tracking ETF the Powershares QQQ (NASDAQ: QQQQ) have broken below key support levels in trading on Thursday, May 20.

These key supports are the 61.8% retracement levels for the entire February 5 through April 23 market advance. The broken key support levels are 1882.82 for the NDX, 44.57 for the QQQQ, 1111.08 for the SPX and 111.28 for the SPY.

The losses were on heavy volume and with the CBOE Volatility Index (VIX) rallying to 45.79 by the close, we would have to call it panic selling. Panic selling typically occurs at bottoms, so the below support levels, if they are reached, are indeed very critical for the days ahead.

With the above supports broken, the next support level is at the February 5 intra-day lows for all these positions. For the NDX this support is at 1712.89, for the QQQQ it is at 42.12, for the SPX at 1044.50 and the SPY at 104.58.

These final support levels are critical for if they are broken, there are only long term support levels left to stop a free fall and all those long term support levels are an additional 10% lower.

Should we reach them, we will already be in a bear market with 20+% losses. That means we should see the markets rebound soon if this is to be a normal correction. That is why the support levels listed above are crucial to the long term advance we have been enjoying since March of 2009. If we do break below them, we may be seeing the end of the bull market.

Disclosure: The Fibtimer.com Stock Timing Strategy holds a position in the S&P 500 SPDRs and the Powershares QQQ.

(Go to http://www.financialwire.net/2010/04/22/about-kollar/ for more about Mr. Kollar; Go to http://www.financialwire.net/?s=kllrfby+cmmtry for more of Kollar’s commentaries; Go to http://www.financialwire.net/?s=cmmtry for all recent commentaries.)

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