Friday, November 1, 2013

SPX Daily Chart Channel Overbot Negative Divergence Outside Reversal Upper Band Violation

On Wednesday, price spiked above the previous days high and then closed at a lower low creating an outside reversal just like 5/22/13 and 5/23/13. Thus, watch the brown box fractal from May to see if it repeats. In May, the outside reversal occurred, then two down days, then a spike higher to near matching highs, and then roll over for a -7% correction. This scenario would bring the SPX higher to the 1760's and 1770's say early next week, then roll over. The breakout of the channel at least deserves a back test of the top rail at 1752-ish. The upper standard deviation line was violated (pink) so a move back to the middle band at 1725 and rising, at a minimum, should occur. Note the gap at 1730-1733 that will form a confluence with the upward moving middle band which is also the 20-day MA at 1724.65 and rising. Thus, the 1752-ish top channel rail, 1745, 1733, 1730 and 1722 support levels are all of interest. Resistance above is 1763, 1772 and 1775. S&P futures are +4 at this writing which targets a test of the 1763 R.

The indicators are all negatively diverged. The spike higher in price on Wednesday corresponds to all the indicators dropping. The bump higher in money flow early in the week should help create a bounce after any move lower but the indicators are in full agreement to simply see lower prices going forward. The selilng volume is greater than all three of the robust up move days over the last few days and it would be prudent for price to move to the 1745 support for a test to see if the selling volume is overpowering indicating that it is time to exit the back door, or, if selling volume is weak which would create a successful back test of the top channel rail for the bulls. Projection is sideways to sideways lower moving forward with price moving back inside the channel and targeting the 1730-1733 gap. The brown fractal may play out with a move higher to matching price highs but watch the indicators and they would be expected to remain negatively diverged. 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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