Monday, October 7, 2013

SPX Daily Chart Standard Deviation Bands Tightening Gaps

The negative divergence spank down from the market top a couple weeks ago remains in play (red arrow). The top was also identified by the upper band violation (pink line) which then requires price to visit the middle band, at a minimum, and more often than not, the lower band. The middle band is also the 20-day MA at 1695 which has already been tested and has given way to the downside. The lower band is 1669, and rising, which serves as a downside target. The neon blue square shows the fractal from early June that may play out again. Price was between the middle and lower bands after a spank down from the top band, and then resulted in a flush lower of about 30 handles to the early June low at 1600-ish. If the fractal repeats, then price would now drop to say, 1660, violating the lower band, and creating opportunity to ride a relief rally upwards.

Reference the S/R chart posted this morning to note the important support levels sub 1669. Thus, potential bounce points are 1669, 1661-1662, 1657 and 1652. Note how price is remaining inside the 20-day MA and 50-day MA sideways bracket through 1680-1695. Bulls win above 1695. Bears win below 1680. The battle continues between 1680-1695. The pink standard deviation bands are squeezing in now so a large market move, wildly up, or wildly down, is on tap in the days ahead. The early August tight band squeeze resulted in a sharp move lower. The indicators are weak and bleak (red lines) so even if a price bounces, the money flow and MACD line especially, will want to see lower lows in price again. The stochastics have not reached oversold territory either hinting at lower prices ahead. Note the many gaps below that will need filling at some point forward while above the candlesticks remain buttoned up tightly without any gaps giving price no reason to head higher.

Watch the battle through the sideways bracket formed by the 20-day MA 1695 resistance ceiling above and the 50-day MA 1680 support floor below. The move from this range is very telling. If price stays inside, the battle continues. A drop through 1680 likely lines up a test of 1669 S, where a relief bounce may occur, or perhaps 1661-1662 support where a bounce would be on the table. Each technical level failure adds more and more bear feathers in the bear cap. This morning will be interesting to see how enthusiastic the dip-buyers are, or aren't. 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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