The S&P 500 (top chart) has breached an important support area between 1375 and 1400. This had served as support in March, August and November 2007. The small hesitation earlier this month came to nothing and the index plunged straight down to a low of 1270 yesterday. It has since bounced up a bit, but the failed support zone will now offer a challenge to the index in any subsequent efforts to move up.

And an effort to rise would appear to be imminent based on the NYSE Bullish Percentage Index (BPI) shown in the center chart. Breadth indicators have differing interpretations in terms of timeframe, but it is safe to say that for the medium term it is very positive when breadth is low and rising. Though the index has not broken through either the moving average line or PSAR to generate a signal, it is poised to do so. Any decline below 20 is exceptionally rare. Once this indicator turns it will be a very strong signal.

This is far from an isolated incident. In fact breadth indicators across the board have been reaching lows unprecedented for the last 15 years. Only 1998 comes close to matching these numbers, but for the most part recent experience has been even more extreme. We will cover this in detail in the technical analysis section.

As for gold (bottom) so far we just havenʼt seen any large break in momentum since the launch in August of last year. The target coming out of the symmetrical triangle was about 865 (based on adding the base to the breakout point). This was surpassed with no hesitation. Recently we have seen about a 5 point retracement starting just over 900, though the metal rebounded quickly and closed at 905.80 on the 24th.