FirstAlert(tm) Daily 11/6: Beware The Third Wave Down

November 6, 2009

- Technical Commentary -

November 6, 2009 (FinancialWire) (By Frank Kollar) — The S&P 500 Index (SPX), and its tracking ETF the S&P Deposit Receipts (NYSE: SPY), rebounded this week from a sharp sell-off last week.

Although the gains this week, culminating in a 2% rally on Thursday, November 5, are a nice boost for the bulls, the stock market still has further to go before there can be any certainty the rally is back on track.

Right now about 50% of the losses have been erased, but around this level is where we expect to see sellers reenter if they are going to.

Typically the stock market corrects in waves of three. The correction lows last Friday would only be a single wave down. If this is the expected second wave higher, it will be followed by a third wave to new lows in coming days or weeks.

The SPX needs to break out to new highs before an all clear is given and that remains a long way away.

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.

[Go to http://www.financialwire.net/?s=frank+kollar to see more commentaries by Frank Kollar.]

The FirstAlert(tm) Economics Calendar lists Treasury Sect. Geithner to speak at G20 meeting, Employment Report for October (8:30 a.m.), Wholesale Inventories & Sales for September (9:45 a.m.), Consumer Credit for September (3 p.m.).

The FirstAlert(tm) Events Calendar showcases CCRN at SunTrust Robinson Humphrey Business and Government Services Unconference; EXLS Annual Investor Day; SRCL, NLC at Morningstar 2009 Stocks Forum.

FirstAlert(tm) Website of the Day: http://www.pbs.org/weta/thewest/people/a_c/cabezadevaca.htm

Quote of the Day: “I have yet to see any problem, however complicated, which, when you looked at it in the right way, did not become still more complicated.” Poul Anderson

Today is: Constitution Day in Dominican Republic and Tajikistan.

Happy Birthday: John Philip Sousa, James Naismith, Edsel Ford, Ray Conniff, Sally Field, Glenn Frey, Maria Shriver, Ethan Hawke.

Today in History: Shipwrecked Spanish conquistador Álvar Núñez Cabeza de Vaca became the first known European to set foot on Texas in 1528. The first constitution of the Dominican Republic was adopted in 1844. In 1860, Abraham Lincoln was elected as the 16th President of the United States, the first Republican to hold that office. In New Brunswick, New Jersey, in 1869, Rutgers University defeated Princeton University, 6-4, in the first official intercollegiate American football game . Democrat presidential incumbent Grover Cleveland won the overall popular vote in 1888, but was voted out of office because he lost in the Electoral College to Republican challenger Benjamin Harrison. Plutonium was first produced at the Hanford Atomic Facility in 1944.

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