Sunday, June 16, 2013

SPX 60-Minute Chart 200 EMA Cross Sideways Symmetrical Triangle

The SPX is under the 200 EMA at 1629.10 signaling bearish markets for the hours and days ahead, however, as seen by the action during June, flip a coin since the bulls and bears are in a knock-down drag-out fight for market control. June begins with the bears finally stopping the multi-month upside rally with the SPX dropping through the 200 EMA, but, on 6/7/13 the bulls regain control. Then, after a one-day fight, the bears took control again, but, the bulls took the ball back on Thursday. Then on Friday, the bears are back in the driver's seat. It is a roller coaster ride. The 200 EMA is very important since bad things will happen to the markets if the SPX stays under 1629. The bulls will be singing a happy tune if they regain 1629 since this will be the first indication that a recovery rally is on tap.

The brown lines show a sideways triangle pattern developing. Watch the action Monday to see if price continues along sideways exploring the upper and lower trend lines deciding on a break-out one way or the other. The ramifications are huge (brown dots). The vertical side of the triangle is about 50 handles. Therefore, a break up and out of the triangle at the 1630's will target the 1680's. A break down and collapse out of the triangle at the 1618 level targets 1568. An interesting aspect of the sideways triangles is that many times they will perform a fake-out move in one direction, that typically occurs about two-thirds of the way through the pattern, and then price will return inside the triangle and move out the opposite side. The chart above shows the false breakout to the upside (blue circle). This was late Thursday and early Friday where the SPX was hinting at a break out above 1640 but it ended in failure. This behavior would be a textbook sideways triangle pattern if price now ventures through the triangle and collapses out the bottom. Note that the triangle only has space for one to three more days of candlesticks; the apex of the triangle intersects at the FOMC meeting Wednesday. Thus, an important market decision appears imminent.

The nod has to be given to the bears for now based on the above technical analysis, however, watch the 200 EMA closely, since if the bulls move the SPX above 1629 the bulls are mounting a move up and out of the triangle and retaking control of the markets. If SPX stays under 1629, the bulls rule moving forward. 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.

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