Thursday, February 13, 2014

SPX Daily Chart Potential H&S Patterns Potential Tweezer Top

The 'V' bottom a few days ago is somewhat cheesy since the MACD line, stochastics and money flow remain weak and bleak. The 150-day MA support, violation of the lower standard deviation band and BOJ money printing, however, create the near-term bottom a few days ago. The SPX launches like a rocket but note the weak volume participation. During January, the volume steadily increased as markets sold off, and the small brown circles clearly identify the distribution days, where the smart money is dumping stock to Ma and Pa Kettle, and Joe Sixpack, who always serve as the sucka's and bag holders. Even with the multi-day rally, note how the volume is lackluster, not exactly a ringing endorsement for the upside.

The double tops were easily identifiable from the negative divergence and overbot conditions (red lines). The mid-January top finished with a rising wedge and the hanging man and doji candlesticks also signaled the top. The tight standard deviation bands squeezed out the strong downside move (yellow oval). The tiny blue circles identify the previous tweezer bottom and tweezer top and potential tweezer top now. The Dow is also displaying a tweezer top for the last two days.

The potential head and shoulders (H&S) pattern is receiving lots of attention these days especially since notable technicians such as Tom DeMark are calling for a market down move ahead. The neon pink H&S targets 1693. The neon blue H&S targets 1639. Price fell through the pink 1772 neck line and came up for the back kiss five days ago where the bulls punched above and this happiness lit the fire for further upside. If 1772 fails, the strongest support in this entire 1720-1850 range, the 1693 is in play. If the 1745 neon blue neck line fails, 1639 is in play. To negate the H&S and begin happy upside markets again, the bulls must take out the prior highs at 1851. The top standard deviation line is 1866.52 and dropping so the door is open for a test of the all-time highs since price may seek that upper band.

There's a gap at 1828-ish, also very strong resistance. The bears must hold 1824 and 1828 resistance to create the right shoulder for the H&S and smack the markets lower, perhaps 50 to 100 handles or more, lower. The bulls must push up through 1828 and that would likely set the course for a test of the prior highs at 1851. The projection is that the January price highs should hold, even if price comes up for a test of the all-time highs, with lower prices forecasted for the days and weeks ahead.

This morning the dollar/yen fell under 102 sending futures lower, S&P -10, but over the last hour the dollar/yen regains the 102 level so the futures moderate higher to S&P -7. The BOJ and Fed continue colluding to control the stock market. This information is or 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 5:05 PM:  Another rally day occurs and the tweezer top is negated with a higher solid candlestick.

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