Updated Auction Market Analysis and Market Profile Trading Levels for the Week

With the glaring exception of the Dow, the primary US stock indices experienced their most severe decline since late November. The decline was much anticipated and certainly overdue. It is unlikely the recent highs in the S&P, Russ 2000 or Naz 100 will not be tested and probably exceeded.

Auction Market analysis is not a predictive tool; it is a theory about how markets develop. It deals in probabilities and makes consistent and objective assumptions about market condition that includes the most probable path a market will follow. A unique characteristic of analyzing markets through this particular lens is that it provides a consistent and objective way to determine when one’s assumptions are wrong. It is truly a trader-centric approach to analysis. It is the job of the trader to make money trading, regardless of what he thinks should be happening in the market. This is a methodology that if followed, forces the trader to be objective.

The weird (highly technical market term, real meaning; I don’t have a clue) thing about last week’s action was the divergence between the Dow and the other indices, in particular the Russell 2000. I can think of several possible explanations but cannot be certain of any single one, so we’ll just let it sort out in the fullness of time, which it will.

In the meantime our working assumption is that the stock markets are in Vertical Development up in the intermediate time frame and that last week’s declines represent normal rotation (Horizontal Development) in a smaller degree of time. If this is correct the downside should be fairly limited and any additional weakness should find support in one of the Key Reference Areas highlighted in the charts below. There is a better than even chance that the additional test of the recent highs in the indices will fail, but that whatever low is put in place prior to that test will not be exceeded by much or for long, and that the larger degree uptrend will eventually produce higher highs in the four primary indices we are tracking in this column.

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Support/Resistance Levels

S&P Cash

Support:1270-1277, 1261-1254, 1245-1239, 1227-1219, 1189-1171

Resistance: 1293-1300

March S&P Mini

Support: 1272-1264, 1258-1253, 1244-1239, 1225-1217,1184-1170

Resistance: 1290-1300

Naz 100 Cash

Support: 2238-2224, 2199-2187

Resistance: 2296-2305

March Naz Mini

Support: 2237-2223, 2192-2181

Russ 2000 Cash

Support: 771-761

Resistance: 792-787, 804-810

March Russ Mini

Support: 76750-762

Resistance: 79050-78550

Dow Cash

Support: 11697-11755; 11597-11549; 11471-11429; 11391-11349; 11054-10926
Resistance: 11697-11755

March Dow Mini

Support: 11730-11694, 11647-11601, 11547-11492, 11435-11398, 11312-11275, 10946-10860

Tom Alexander is an expert in Market Profile. You can learn more at Alexander Trading.

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