Bulls Still In Charge But...

It only takes a quick glance at the daily SPX indicators to assess the current market position. Last week, for the first time since the 2346 low, they “sputtered”. It is no wonder since from about 2600 the index has started to meet with more and more overhead resistance which extends all the way to 2800-2815. If you want to know when we can be fairly certain that the bear market has ended, it will be when these levels are exceeded, and it’s obviously not going to be anytime soon. But over the short term, the daily indicators are still in the green.

SPX closed at 2665 on Friday. This is where the ‘going up’ gets tougher because the nearby overhead band begins to derive assistance from the June/July lows of last year. On Monday, the index reached 2675 and was pushed back down to 2612. Friday’s move can therefore be considered a test of the recent high which has not yet given signs of being attained and actually has the possibility of reaching 2675-2680 and perhaps 2713. The former is a near-term P&F projection and the latter would constitute a .618 Fib retracement of the entire decline from 2941 to 2346. It’s a fairly safe bet that, when you combine these projections with the overhead resistance denoted earlier, we should look for a correction to start by the end of the month.  

The weekly indicators have also improved, but remain in the red.  

Chart Analysis  (The charts that are shown below are courtesy of QCharts)

SPX daily chart

I have widened the chart so you can see more clearly the support and resistance levels discussed above. You will have to scroll down in order to see the indicators. Let’s start there. Last week they all turned down with the A/Ds (bottom) leading, which is normal. By the end of the week, they were turning back up. In order to get a sell signal, they need to keep going down and drop below the zero line (or the 50% line). This is usually preceded by divergence and we are now in a position to develop some if we make a slightly higher high in price, and the indicators remain below their former peaks.

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Analysis of the short-term trend is done on a daily basis with the help of hourly charts. It is an important adjunct to the analysis of daily and weekly charts which discusses the course of ...

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