Interestingly, we talked about how there are two axioms to triple tops, completely opposite to no surprise, but one school of thought says there is no such thing as a triple top, so price would have busted up thru at 1460 and we would be at 1480 now, but we are not. The second school of thought is that after three tries and failure, price is exhausted and this behavior of forming a triple top actually leads to weakness ahead, which is what played out on Friday. To make this discussion even more interesting, Gann says that quadruple, yes folks, quadruple, this is real stuff, Keystone is not pulling it out of his ..., er rather, thin air, tops almost always result in a break up and thru. Thus, if price comes back up to the top rail, she is probably going to 1480, 1500, 1520.
But first thing is first. Note how price came down to tap the lower channel rail at 1430 on Friday. On Monday we find out if this love tap was enough, or if price needs a more substantial test of the 1424-1429 zone. Keystone thinks the latter is the case. The green lines show upward sloping indicators. However, this is not positive divergence since price did not make a lower low than five days ago. This is why price probably wants to come down into the 1420's, perhaps Monday morning, and then the positive divergence green lines can provide the market bounce.
The plot thickens since once price comes down into the 1420's, watch the indicators closely. See how the RSI and MACD line is actually relatively flat over the last few days? When price comes down these two indicators could easily lose their positive slope green lines and not be agreeable to seeing a bounce in the markets occur. But the MACD histogram and stochastics are much more likely to stay positively sloped and when price drops a few handles these indicators will signal positive divergence and create a bounce for price. The RSI and MACD line, however, if they do lose their positive slope, will want to see another lower low for price after the bounce occurs. This hints that the bounce that occurs may be weak and short-lived, not the buy the dip type rally bounce that everyone is used to this year. Something like down to 1424, then a bounce to 1433, then right back down again, to 1419, to dip a toe in that 1403-1419 support zone that is a congestion area during August and early September, may be on tap. Remember, if price jumps higher towards the top rail again, up and over 1460, however, that will likely indicate a higher move towards 1500. The bearish case is more in play moving forward.
Folks probably did not realize a chart can tell you so much. LOL To keep things simple since the above may provide nothing more than a migraine headache for many, watch the 50-day MA at 1433.48 as an easy guide. Above 1433 and market bulls win, below 1433 and bears win. SPX S/R is 1476, 1472, 1468, 1460, 1446, 1441, 1433, 1424, 1419 and 1403. This information is for educational and entertainment purposes only. Do not invest based on anything you read or view here. Consult your financial advisor before making any investment decision.
The chart was very useful. The only headache I have is from adding longs too early on Friday. Timing is something we all struggle with, I'm sure. When a change in bullish/bearishness is in the offing, you usually telegraph it, right? You'll say "if such and such happens, Keybot may flip". I guess prior to those occasions, we should lighten up on our main holdings - if we haven't already been stopped out. Maybe add a short term trade in the direction we think KB is going. Hard to know how to play it sometimes. Just read the indicators, I guess. They're the same ones KB is using. (This is all just for educational purposes anyway!)
ReplyDeleteThat seems like a half decent approach Weaver, where you can somewhat front run Keybot. If the move does not occur then the trade can simply be exited, if Keybot does move that way that would give the trade a head start. Keybot also serves as the general gauge of where markets are at in real-time, and as of the weekend now, the bears are in charge of the markets.
ReplyDeleteOn Friday, from the early morning, we saw how copper woule be important. The bulls had won back the utilities sector mid week so the bears needed to find a new catalyst and Keybot was identifying copper and volatility. Copper cracked so as soon as that lost the level shown, the markets were in trouble. Interesting, Keybot was hanging on and did not want to go short but once voaltility spiked, and then utilities rolled over, it was one big bear party. Markets will remain weak if these sectors remain bearish, focus on JJC, VIX and UTIL.
As a gauge for Monday morning, watch these three characters closely to determine market direciton. If UTIL pops back above 485.67 at the open, the bulls will run despite wherever the markets are at. Conversely, if the markets pop or move higher, but UTIL remains under 485.67, that move higher will likely be short-lived. If JJC, VIX and UTIL remain bearish, as per their targeted values that Keystone will list before tomorrow mornings open, the bears are going to keep pushing lower.
Watch the Asian makrets this evening, the Spain elections and the futures.