Wednesday, September 25, 2013

SPX Daily Chart Upward-Sloping Channel Upper Band Violation Tweezer Top Potential Island Reversal

The tweezer top (blue circle) played out as highlighted in the chart four days ago. The top was identified by the tweezer (two long upper shadows on the two peak candlesticks hinting at a trend change on tap), the top rail of the channel and the upper standard deviation band violation. So, to use a baseball metaphor as the playoff season approaches, 'three strikes and yer out'. Since the move back from the upper band violation has begun, price would be expected to tag the middle band, also the 20-day MA at 1675.77, at a minimum, with a potential move to the lower band in play as the weeks play out as well.

The maroon circles show two juicy gaps that will likely need filled; 1672-1674 and 1688-1691. Note how price has buttoned up the top side as it moves lower not leaving any gaps behind. The neon green line is very strong support at 1691, also where the gap is at and also last week's low at 1692. Considering the gap and other criteria, price sits on an island at 1691+ so a potential island reversal is in play where price would stumble lower to 1691-1692, and then collapse in a heartbeat to 1688 falling back through the gap.

The red lines show negative divergence in place and the indicators are sloped strongly negative moving forward, weak and bleak, and likely desire lower prices even after any bounce occurs. Watch to see if the RSI turns bearish under the 50% level. Projection in the near-term is a move to 1688-1691 and then a test of the 20-day MA. A recovery move is in play to 1710-1722 but this should result in further roll over with price seeking the 20-day MA, the gap fills, and potentially lower. Projection is sideways to sideways lower for the days and weeks ahead. 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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