I’ve been doing more work on the series of bearish reversal candles over the last twenty years and have combed through 90% or so of the intervening period. I’ll finish that at the weekend and may do a dedicated post on these. The ones I have found so far are:
1999 Feb – From 2nd candle into 5% decline
2002 Dec – From 2nd candle into 17.3% decline
2004 Dec – From 2nd candle into 4.46% decline, then marginal higher high, then 7.56% decline
2005 Oct – From 2nd candle into 2.08% decline
2005 Nov – Failed and resumed uptrend into December interim high
2005 Dec – From 2nd candle into 4.44% decline
2007 Oct – From 3rd candle into 57.4% decline
2014 May – From 2nd candle into 1.66% decline
2014 Sept – From 2nd candle into 1.65% decline, then marginal higher high, then 9.83% decline
2015 May – To be determined
I’ve been reading a lot of talk this morning about how there is no real chance that SPX will make any kind of high in the easily foreseeable future and that’s natural. This wave up from October 2011 has been so long and so powerful that it has left many with the strong impression that TA is valueless and that the only possible road to success is buying the dip and holding on at all costs. An extended wave 3 up will breed bullish complacency.
In all honesty that may well be the case for another two or three years, depending on the individual trader’s tolerance for pain, and over a timescale of decades the long side always wins through. However the current setup on equities looks VERY toppy, and the level of denial that I’ve been seeing from some quarters about this just beggars belief.
The tape didn’t actually move much yesterday, but nonetheless the bears had a very decent technical day. On SPX It looks very much as though the possible falling wedge I posted yesterday morning may be in play, and if so that is very significant, because in this context that would be an EW ending diagonal, a terminating pattern that in turn is the final move within the much larger rising wedge / ending diagonal from the October low. I’m very much liking the odds of putting in the spring high in this area.
I gave my preferred topping range last week as 2126-35, with a possible overthrow into the weekly upper band at 2145. The weekly upper band is now at 2152. The high yesterday was at 2131.78, well into that preferred topping zone.
Short term the chart looks weak, with a 5min sell signal, a 15min sell signal not yet fixed, and a possible rising wedge resistance trendline hit at the high yesterday. That opens up a possible move to test rising support from 2067 and the 50 hour MA, currently in the 2012-4 area. A break below there should mean mean that the spring high has most likely been made, though it might still then be retested. SPX 15min chart:
Obviously SPX has delivered a lot of chop this year and remarkably, of the nineteen weekly candles so far, eleven have tested the weekly middle band with two near misses. Of the last ten weekly candles, six have fully tested the weekly middle band with two near misses. Will we see the same thing again this week? If so the weekly middle band is currently at 2077. SPX weekly chart:
There’s not a great deal to add on SPX today. Bulls failed to recover over the daily middle band yesterday but did establish a three touch rising support trendline from the 2067 low. This is a springboard to attempt the marginal new high that I’m looking for here in the next trading days and the big gap up is a promising start to that. On a break below that rising support trendline the chances are that both the short term and 2015 high would already have been made. SPX 5min chart:
SPX gapped down hard below the daily middle band yesterday and rallied to close just under the middle band. What I would like to see now is a break back over the middle band, and then a fast move back to the daily upper band to make a marginal new all time high. I’d be looking for the 2015 high at that marginal new high, and would then be looking for a 300+ handle decline to retest the October low at 1820, with a rally on the way to establish an H&S right shoulder at the likely 1972 area neckline.