The badgers were getting very angry yesterday and we saw wild swings on SPX, though in the end SPX closed at 1862, not far under the daily lower bollinger band at 1867. SPX daily chart:
Yesterday bounced hard, then retraced all of that bounce to make a marginal new low, and closed slightly up. The bounce has established the 200 DMA as resistance and was the fifth day out of the last six that SPX has closed well under the daily lower band. The lower band closed at 1883 yesterday and could close as low as 1965-70 today. SPX daily chart:
I was asked yesterday morning why the tone of yesterday’s post was so bearish, and the reason was of course that I thought the odds favored a significant move down. We saw that move and both the SPX 200 DMA and main double top support broke down with a lot of conviction. The double-top target is the 1789 area and I’m expecting SPX should hit that target within a few days. The trend on the market has changed for the moment and while we will get some rallies, I won’t start looking seriously for a low here until we reach that 1789 target area. I’m not expecting to be waiting long for that.
I’ve been looking at my RSI 5 / NYMO daily buy signal that triggered at the 1970 high with some concern here, as it might have delivered a stronger rally than I’m expecting, but it failed at the close yesterday, so it is no longer a concern. That was the first outright fail from the signal trigger since the start of 2007, but there’s a first time for everything. It’s not unprecedented. Looking back further I found another fail in a strong downtrend in 2002. The timing of this signal was particularly annoying, but hey, that’s the market we trade in. SPX daily chart: (more…)
I was saying on my daily SPX chart yesterday that if we were going to see a move directly to the double top target at 1937.70, then I was expecting that move to start yesterday, and obviously that’s what we saw. The low yesterday was at 1941.7, and we may well make that full double top target today.
This move was an important point of recognition and I think it is likely now that the market is starting a 10% or more correction, though we haven’t yet had the full confirmation of that move that would come with a conviction break below the 1904 low on SPX. That 1904 level is the support level on a large double top that would target the 1789 area on a break below 1904, and that 1789 level is very close to both the 23.6% retracement level for the move up from October 2011, and rising support from that same low. (more…)
I was saying on Friday morning that the bear case shouldn’t be written off yet and, well here we are. The bounce failed at the 50 hour MA and SPX made a new low, closing well below the daily middle band.
In terms of past RSI 5 / NYMO sell signals the situation is improved as the decline is now larger than two of the 29 sell signal declines back to the start of 2007, and I’d also note that SPX and Dow also made the 38.2% fib retracement levels at the low on Friday, if this turns out to be a wave 4 retracement. (more…)
I called the intraday turns on Friday very well, but was struggling to believe what I was seeing. The double top target at 1985 wasn’t made, with a failure at 1990 and a push up to close back at 2007. If we are to make a new high now from that low then that would be unprecedented among the eleven RSI 5 / NYMO daily sell signals going back to the start of 2012.
Looking back further however then there is one precedent for that among the twenty four signals going back to the start of 2007, and it’s not encouraging. That signal didn’t fail, by which I mean it didn’t go as high as the highest RSI 5 peak generating the sell signal, but SPX ran up almost another 4% before making the 2010 spring high. In this case the previous RSI 5 high is lower, but if that held again here SPX might still make it to the daily and weekly upper bands, both currently in the 2030 area, and possibly a bit higher. (more…)
Another day of dramatic seeming action with only a small final move on the daily close yesterday, marking a fifth day of consolidation since SPX made the 2005 high. The channel support trendline on WLSH and the megaphone support trendline on Dow broke at the lows yesterday, so all the support trendlines from the August lows have now been broken. That could mark a high being made right here, but the prospects for a move to primary resistance in the 2020-30 look pretty good unless bears can put a whole day together and break the current sequence of higher highs and lows on SPX. SPX daily chart: