Thursday, October 17, 2013

SPX Daily Chart H&S Patterns Price Extension

The market thrust higher over the last few days has succeeded in creating a VST long and strong profile for the indicators (short green lines) so another higher high in price will be desired after a sell day occurs. However, note that the indicators are seriously lagging the positions from the September market top (thin red lines). This is not negative divergence as yet since price has not exceeded the September highs. If price does punch out numbers at 1729, 1730 and higher, watch the thin horizontal brown lines for the indicators to see if additional juice can be provided. By the looks of it, even if price makes new all-time highs, the indicators will likely log negative divergence and require a move lower.

The blue dots show the price extension in place again just like the prior tops where the SPX is above the 20 MA above the 50 MA above the 200 MA, extended, and requires a mean reversion. The volume candlesticks show three reference points for the price all at these same levels at 1710-1730. Note that the buying volume yesterday could not surpass the buying interest that was shown as the September top was formed. A strong market should have shown volume blowing out this level. Additionally, the selling off the top in September was high volume and the buying volume yesterday was not even close to surpassing this volume. In a nutshell, the volume interest in the market upside continues to peter away.

There are two H&S patterns in play but both would be negated if the right shoulder right now moves above 1730. A slanted H&S with head at 1730 and neck line break at 1670-ish targets 1585. A regular H&S with head at 1730 and horizontal neck line at 1630 targets 1530 if the 1630 level fails. The VST juice for the indicators hints at a potential down-up-down move ahead. Current projection would be a market top occurring in the coming days, perhaps into next week, in this 1722-1735 range and roll over. Note that the upper trend line is agreeable to a move to 1745-ish. This may occur if there is positive news out of left field that provide an additional market push higher. 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.

Note Added 5:57 PM:  The SPX prints a new all-time closing high at 1733.15 and new all-time high at 1733.45. The H&S patterns are negated and tossed into the trash bin. The price jump to 1733 violates the upper standard deviation band which shows price overextended verifying the price extension above the moving averages. The bulls develop short term momo and may want to play around at 1722-1745 for a few days. The collapse in the VIX provides bull fuel.

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