Saturday, January 25, 2014

SPX Daily Chart Rising Wedge Triple Top Negative Divergence Tight Bands Squeeze Lower

The neggie d spank down occurs. Remember a few days ago when both the weekly and daily charts were agreeing with neggie d across all indicators--that is something you do not want to fade, and that was 60 handles ago. The same would be true if both the weekly and daily charts, of any index, stock or sector, are positively diverged. You would not want to be short that stock since a launch would be at hand. The collapses from rising wedges can be quite dramatic; the chart above shows the initial drop late last week from the blue rising wedge. The strong squeeze move expected from the tight standard deviation bands (gold ovals) occurs and it turns out to be down.

The brown lines show key S/R levels at 1851, 1848, 1843, 18401841, 1828-1832, 1818, 1808-1810, 1806, 1801-1803, 1796, 1788, 1781, 1772-1775, 1768, 1762-1763 and 1745. A perfect place for price to bounce would have been the 50-day MA at 1812.52 which was also strong support and the November and December tops, but, alas, price collapsed through like a hot knife through butter, very bearish behavior. The 1788 support is holding to begin the new week of trading. The small red circles show the triple top that printed resulting in the smack down.

The indicators are all weak and bleak, sans money flow that has not yet printed a lower low, but this hints that lower lows in price are desired after a bounce occurs. Usually, at least a dead cat bounce occurs after a big drop like Friday, so Monday may provide a dip. If so, it will be interesting to see if the dip-buyers run in to buy like 2013. Sometimes the first dip that may occur is not the one to buy but instead the second dip. The 1772-1775 area would be a nice place for price to bounce from.

The selling volume is robust but note that volume was higher in this same price area during December, so the bulls can place a tiny feather in their caps. There are also two gaps above, at 1843 and 1828, that will need filled some day. Projection is for sideways to sideways lower moving forward. Watch for H&S patterns to form. 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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