Wednesday  30 June 2010

 The weekly chart shows the likely direction for the market over the next several months.  It ain't a pretty
picture.  For the here and now, price is teetering on important support.  The biggest problem with this
support is that we are now down here a few too many times, and the manner in which price reached the
support level is also problematic.  This last time, the ease of movement has been swift.

 Will support hold?

 Hard to say.  It looks like not.  Well, we say hard to say, but the handwriting is on the wall.  Support
could hold and price rally, but it would be a postponement of the inevitable: much lower prices.  Because
the 1035 area has held, we will wait for confirmation that it is giving way.  It is possible to argue that the
market may be oversold, but oversold is relative and can easily become MORE oversold.

 Back on 8 May, we mentioned that the large decline of 6 May would create a trading range, [See S & P - Apply Some Simple Logic, click on http://bit.ly/aurqH9, see third paragraph above chart at end].  Again,
we emphasize that support and resistance are areas, not absolute points, so there can be some
penetration, but price still holds the area.  You can see that price has been in the anticipated trading
range.  It is evident that the best any rally could do was reach a 50% retracement, and that speaks to
weakness in general, and it addresses why the overall character of the structure shows weakness.

 Bottom line for the near term is to see this support violated with conviction, not just with lower prices,
but also accompanied by increased volume.  Until that happens, there still remains the possibility of some
kind of rally. 

 The previous rally high around 957, back in June 2009 was resistance, and it will now offer potential
support as price declines into it.  We have also drawn a channel off the April 2001 high, and it shows that
there is a lot more room to the downside.  We are of the mind that price will be contained within this
channel for sometime to come, including rallies.  Ultimately, the March 2009 lows should be retested, and
that level is 665.75.

 No need to be in a hurry.  There is ample room downside to get positioned while this tenuous support
is resolved.