Thursday, March 13, 2014

SPX Daily Chart Upward-Sloping Channel Negative Divergence Hammer Candlestick

The bears cannot gain traction to the downside. Yesterday's candlestick shows the drop to 1854 but the bulls fight back and close at the highs of the day creating a hammer candlestick. This is a bullish reversal candlestick pattern so today will need to see follow through for bulls to the upside to confirm the reversal. Note the prior bottoms where the February bottom was created by a hammer and the October bottom was a doji candlestick. Interestingly, the sell off the day before is a bearish engulfing candlestick pattern where price printed above the prior days high and ended below the low, a very bearish pattern. Mixed signals continue in equities.

The red rising wedge, overbot conditions and negative divergence created the spank down over the last three days. Price barely teased a test of the 20-day MA at 1852.32 which is a cheesy test that likely requires price to revisit this important support again. The stochastics and money flow are printing lower lows which act as a weight on price moving forward wanting to pull price lower. Price may jump higher today due to the hammer candlestick and a retest of the highs is not unreasonable (red circle), and a test of the upper trend line, however, the expectation is that the negative divergence would remain after any higher price high and simply create another spank down and a more extended move lower as the days and week or so forward plays out. The bears do not want to see closes above 1880 since this will hint at a move to 1920. 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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