Monday, July 1, 2013

SPX Daily Chart Downward-Sloping Channel Expansion Pattern H&S Battle for 1618-1623 Resistance Gauntlet

The 20-day MA at 1618.77 and falling, and 50-day MA at 1621.72 and rising, are the key to market direction forward and will determine the fate of the broad indexes. The 1618-1623 resistance gauntlet (black lines) is for all the marbles. Using the Battle of Gettysburg as an analogy, in honor of the 150th Anniversary of this historic Pennsylvania conflict that changed the course of the Civil War in America, the North wins above 1623 (bulls) while the South will win under 1618 (bears). Price is deciding if it has the oomph, or not, to retake these critical moving averages and point the way higher for equities. The 20 under the 50 is a bearish signal moving forward.

The three-day bounce occurs off the 1560 intraday bottom due to the stochastics and money flow positive divergence. The other indicators were not agreeable to the bounce and would rather prefer to take another look at lower numbers. The RSI, stochastics and money flow are at or below their 50% levels in bear territory. The MACD is under the zero line another negative. The 50-day and 200-day MA's are leveling off another indication of topping action.  The thin brown lines show the downward-sloping channel in place while the thin blue lines show an expansion-type pattern in play as well (megaphone). The fate of the markets will be decided in the pink circle this week. S&P futures are +7 at this writing less than 3 hours before the opening bell. The bulls have an edge this week since new money enters markets to begin the month, there should be bullishness ahead of the July 4th holiday, Fed heads will be pumping QE talk tomorrow, and the politicians are on vacation again which is a positive for markets when they are not in Washington.

The RSI and money flow never reached oversold levels. The markets bounced four days ago mainly due to China stepping in to prevent a Lehman-type banking crisis last week. This week may simply be sideways slop through 1600-1630 as traders may prefer to wait for next week when all traders will be back from vacations and ready to kick in the summer trading. The purple H&S shows head at 1680-ish, neck line at 1540, so a target of 1400 is in play if 1540 fails. Projection is for lower prices moving forward, back under 1600 and lower, however, if the bulls can take advantage of light volume this week and push the SPX above 1623, then markets may experience a couple weeks of buoyancy with a move back up to 1636 and 1649-1650 R on tap. 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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