Quote Originally Posted by Financially dependant View Post
Hi Hoop, thanks for another great explanation of our current situation, I always value your posts....I am interested in why you call the 1120 support weak? With such high volume buying into the S&P at that level doesn't it give the support strength?? Always interested in your view (and anyone else who wants to chip in). Cheers FD.
Hi FD

Yeah... testing support under very high distributional volume and succeeding (not breaking) does show strength.
A quick simple way to gauge how strong a S&R level is, is by looking back through history and notice how many successful tests and retests that level has had without breaking. Yes volume is a factor as well...The strength of S&R levels can wax and wane over the years so a high frequency of successful tests without breaking in a more recent period would make the investor perceive the S&R level to be stronger than if the tests were say 10 years ago.

My orginal thinking when writing my last post was that the 1120 support was reached during the final stages of the freefall event and the market was exhausted by the time 1120 was reached at it sat on this 1120 level for a few days exhausted (buyers = much lesser sellers). The successful retest of the 1120 10 days later was pleasing and gave a slim hope for the bullish investors that the bottom may have been reached (double bottom).

I had another look going back to when 1120 S&R level first appeared in April 1998 onwards...yeah I may have been a little harsh on calling it a weak support, it has had some successful tests and it does seem to be a somewhat stronger level in mid 2010 even though the 1120 resistance held under lower than average volume...OK lets call it a medium strength 1120 support and up the chances of a possible bottoming process...however the chart still looks just as ugly as before .