Category Archives: Patterns

Possible Change of Plan

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Another whippy day yesterday, but one that, unlike the more superficially bullish Wednesday and Friday rallies last week, leaves the bulls in a very good position for a break up today. The daily lower band was tested in the morning, so that was either day three or day five of this sideways lower band ride, depending on how the second day with tests of both lower and middle bands is counted. The candle was a 60% bullish reversal hammer, and there are now possible bottoming setups across all the main US equity indices as well as some broken declining resistance trendlines. SPX daily chart:

140930 SPX Daily Trendlines BBs MAs

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Whiplash Decline

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Another whiplash day on Friday with a strong rally to 1986. That looked more bullish than it should have done because, rather than rally in the morning and close weak, the rally was in the afternoon and closed strong. Nonetheless the high was in the 1980-9 target range I gave in the morning, and anyone buying that high on Friday afternoon is very heavily down so far this morning. SPX daily chart:

140929 SPX Daily Trendlines BBs MAs

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SPX Double Top Breaks Down

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There were three significant technical landmarks for me yesterday. The first that double top support on SPX broke down, breaking the third and last support level I gave last Friday morning. The second was that the daily RSI 5 closed under 30, so the daily RSI 5 / NYMO sell signal I’ve been following has now unambiguously made target, though the historic stats on these nonetheless further support that the SPX double-top that has just broken down should make the pattern target in the 1937.70 area. The third was that a daily lower band ride was confirmed with the strong punch below the daily lower band.

So what now? Well the odds favor a lower close today, but not another trend day down. We may see a modest rally close or perhaps a flat close as a less likely but possible alternative. SPX should test the lower band at some point today, and that is currently at 1975. Yesterday’s low is very unlikely to hold and all longs should be counter-trend now until the double top target is hit. SPX daily chart:

140926 SPX Daily Trendlines BBs MAs

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The Long Shadow of Pavlov

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That was a strong rally yesterday, and the long bull move over the last few years has left many of us with a very strongly conditioned response to any strong move up, to jump on the long train in the confident expectation that it wouldn’t be turning back down anytime soon. Don’t get me wrong, that conditioned response has served everyone well in this long long long bull run, but in this particular case it needs to be suppressed until we see some actual evidence of a bullish break, and we haven’t seen that yet.

In terms of the rally yesterday it followed the roadmap I gave in my post yesterday morning almost exactly. There was a lower low in the morning, with a low just 0.15 above 1978.48 support, then a rally to 1999.79, just 0.21 under the top of my 1995-2000 target zone. The close was 0.68 below the 50 hour MA, and 0.35 above the daily middle band, so a close directly on the main resistance levels I gave in the morning. SPX daily chart:

140925 SPX Daily Trendlines BBs MAs

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