Tuesday, June 4, 2013

SPX Daily Chart H&S Downward-Sloping Channel S/R Potential Falling Wedge Developing

The daily chart is now making lower lows and lower highs creating a downward-sloping channel. The thin green line is the upper rail of the channel. This is a big change compared to the higher lows and higher highs occurring all year long. The blue lines show an H&S pattern with head at 1670, neck line at 1650, which targets 1630 exactly where the bounce occurs from. Using the intraday number for the head at 1687, and neck line at 1650 targets 1613. The 1614 is strong support so this target has some street cred for a possible test of 1613-1614.  The S/R shown by the brown lines is 1649-1650, 1634, 1626-1627 (that the bulls defended yesterday), 1618, 1614 and 1597-1600.

The thick green lines show a potential falling wedge under development with the apex of the wedge pointing to the strong 1597-1600 support hinting that eventually a test will be needed at this level. Note how the important 20-day MA is at 1646.11 moving flat to higher, the strong resistance is 1649-1650 and the top rail of the channel as well as the potential falling wedge are at 1650 as well. In addition, the 1650 is the neckline of the H&S pattern that never received a back kiss. Thus, 1650-ish is a very important confluence where good things happen for bulls above 1650 while the bears will maintain market selling pressure under 1650.

The indicators are all weak and bleak (red lines) except for the RSI positive divergence (short green line) that bounced price yesterday after the low prints occurred. Interestingly, the stochastics did not become oversold and this is what would be most expected to create a bounce. Projection is a potential move up to test the 1649-1650 resistance but the price action should roll over again and explore lower lows at 1626-1627, 1618 and 1614. 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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