The following (green highlights) is an excerpt from our Tuesday April 10th What We’re Watching Today report entitled, US Market Decline Facing It’s First Big Test.
What We’re Watching Today is one of 8 different reports that Asbury Research produces for subscribers at various intervals throughout the month. Sample copies of all of these reports are available by clicking here.
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Asbury Research’s What We’re Watching Today
Tuesday, April 10th 2012
US Market Decline Facing It’s First Big Test
In today’s report we will attempt to address the following questions:
- Where is underlying support?
- How deep is this correction likely to be?
- How much can the market decline and still remain in a major bullish trend?
Chart 1 (not shown) displays a daily bar chart of the bellwether S&P 500 since 2011 and highlights three important clusters of underlying support.
The first level, at 1371 to 1356, represents the May 2nd and July 11th 2011 benchmark highs and the 50-day moving average (a minor trend proxy). It represents a 4% to 5% decline from the April 2nd high of 1422 and starts at about 11 points lower than Monday’s close.
The chart below displays the S&P 500 since January 2012 and highlights, in green, 1356 support.
The teal highlights show that, as of 3:05 ET on April 12th — not quite 2 full days after our April 10th report — the S&P 500 has already rebounded by 30 points or +2.2% from this support.
This is a pretty meaningful 2-day bullish reversal in the index, but the more important question is whether the aggressive rebound in the US stock market this week is the resumption of the October 2011 advance, or just a minor rebound within an emerging, deeper decline.
We discuss this topic in detail in two additional reports that we published this week, one that pertains to the positive correlation between the US stock market and energy-related asset prices.
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