Tuesday, April 8, 2014

SPX Daily Chart Sideways Channel Fibonacci Retracements Outside Reversal Top

The market drama continues. The pink standard deviation bands squeezed in forcing a move discussed a few days ago. The price action did turn out to be a mirror-image move as compared to the tight band move from mid-December. Back then, note how the tight bands started to send price lower, the bears appeared in great shape, but the bulls slapped the bears in the teeth and rocket launched for a squeeze move higher for the back half of December. Over the last few days the tight bands start to squeeze price higher, the bulls appeared in great shape ready to launch above 1900, but the bears slapped the bulls in the teeth and crushed price from the 1890's to the high 1830's in a heartbeat. A mirror image of the tight band action in mid-December.

Although price has teased the lower bands a touch has not yet occurred so the expectation is for price to move lower to violate the lower pink band and then mount a recovery move. Once the lower band is violated a move back to the center band, the 20-day MA at 1863.40, would be projected, at a minimum where a bounce or die decision would occur for the future path. The blue lines show the Fibonacci retracements for the move up from 1740-ish to 1897-ish. The 32% Fib is 1836 essentially where price bounced today from 1837-ish. LOD 1837.49. The 50-day MA is 1840.57 also serving as support helping create today's bounce. The lower standard deviation band is 1836 so there is a confluence of support in this 1836-1841 area. In addition, the long over two-month sideways channel through 1840-1880 has yet to commit to one side of the other. Bulls win above 1880. Bears win below 1840.

The 100-day MA is 1826.68. The 20-week MA is 1831.15. The 1828 level is strong support so the 1827-1831 level is another strong confluence. Price is deciding to bounce or die from this 1848-1851 S/R area. If failure, a test of the 1836-1841 area is next which is the critical 50-day MA. If this fails the 1827-1831 test is next. Note the lackluster buying volume today compared to the two days of selling volume. The lower low in price over the last couple weeks comes with lower lows with indicators but the money flow and histogram near-term positive divergence did create today's bounce. The indicators are lining out sideways. The stochastics should dip into oversold territory and the RSI is under 50% indicating that some further weakness is anticipated. If bulls push higher, 1859 is the first strong resistance then the 20-day MA at 1863.40.

Note the red candlestick off the top on Friday. Price printed a higher high, an all-time high at 1897.28, then a lower low and closed under the prior day's low, an outside reversal day, which typically leads to bearishness moving forward. Adding all this mumbo jumbo together, what does it all mean? Projection is sideways to sideways lower moving forward. Near-term, perhaps a test at the 1836-1840 area again, violating the standard deviation band, perhaps a quick collapse to 1827-1831, but then a recovery bounce back to the 20-day MA currently at 1863, then roll over to the downside moving forward for the days and weeks to come. 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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