Tuesday, October 15, 2013

SPX Weekly Chart Rising Wedge Versus Ascending Triangle

As the age-old saying goes, 'there is a fine line between love and hate'. Such is the way with charts in relation to the battle between the rising wedges and ascending triangles, or, if a chart is selling off, between the falling wedges and descending triangles. As anticipated from the SPX weekly chart on the weekend, price comes up for a look at the critical 1710 resistance level. The weekly close in July is 1709.67 and the weekly closing high in September is 1709.91. Yesterday's close is 1710.14. For an accurate comparison to the prior weekly closes you must wait for the 4 PM Friday print to end the week, however, the tale may be told before then.

The red rising wedge is a bearish pattern while the green ascending triangle is a bullish pattern. The rising wedge is in sync with the ongoing negative divergence supporting the bear case where price is making matching or higher highs but the indicators are sloping lower. The RSI is trying to make a higher high as compared to 3 weeks ago, if so, this may add a couple more weeks of indecision to markets and cause price to continue to play around at current levels. The maroon upper trend line provides another alternative rising wedge pattern which would only allow a maximum 1722 print to occur. The red rising wedge remains open to a print at 1750-ish, however, as mentioned, the indicators are negatively diverged and unenthusiastic about any market upside ahead. If the SPX breaks up through 1710 over the next couple days, the big test will occur at 1722. The ascending triangle is the bulls best friend and it would easily target 60 to 90 handles higher if the 1710 is taken out to the upside.  This bullish outcome would reward many long traders with their 1800-ish goal.

Key S/R is 1730 (all-time high), 1729, 1727, 1726 (all-time closing high), 1725, 1722, 1720, 1710, 1709, 1708, 1707, 1706, 1704, 1702, 1700, 1699 and the strong 1697-1698 support. The rising wedges and negative divergence hold the upper hand currently. Price is also above the 20 MA above the 50 MA above the 200 MA which continues to beg for a mean reversion moving forward. Current projection is sideways to sideways lower moving forward. If the SPX moves above 1710, 1722 is next, and this level would be the last chance for bears to make a stand. A move above 1710 will place the bear case in jeopardy. Today is a big deal and the 1710 level holds the key. Which side will win over the coming weeks; the rising wedge which will send markets lower over time and likely end the year far weaker, or, the ascending triangle which will catapult the bulls to a Roman orgy victory with new highs into the end of the year? 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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