Thursday, September 25, 2014

SPX Daily Chart Tight Band Squeeze

The stock market drama continues with sideways choppiness resolving to the downside. Yesterday was a bull trap as the dip-buyers, trained like Pavlov's dog due to never-ending Fed easy money, ran into the long side only to have their head delivered on a platter this morning. The pricing behavior at this tight standard deviation band squeeze (pink lines and arrows) is remarkable and very atypical. Price hinted that the upside breakout would occur for the tight squeeze but price stalled at the upper band instead of continuing higher. So the bears had the ball and pushed lower looking like they will claim victory for the strong 80 to 90 handle band squeeze move but price stalled at the lower band. Yesterday the market rallies and it appears that the bulls were going to take the tight band squeeze to the upside with a big party to 2050 on tap. Now, today, the bulls are smacked in the teeth and the final result appears to be a squeeze move lower. (Tight band squeezes only tell you that a major move is coming but does not predict direction.)

The red lines show the negative divergence in place creating the two peaks and smack downs (red arrows). The indicators are weak and bleak wanting lower lows after any bounce occurs except for the money flow that is more optimistic wanting to see price recover quickly. The blue bars show how price retraced 100% of the down move from late July to early August and then topped out at the 1.24% Fibonacci extension area of 2009-2015.

Price has lost the lower red trend line and also back kissed the trend line with yesterday's rally resulting in collapse today. The SPX loses the 50-day MA at 1976.41 so monitor this key level. The tight band squeeze appears to be resolving to the downside and perhaps sliding down the lower band similar to the early August action. Price reversed from the 2020-ish top which targets 1930-1940 (based on an 80-90 point drop which was the relative moves for the prior squeezes in May and late July. Major S/R levels are 1985-1986, 1973, 1968, 1963, 1960-1961, 1951 and 1924. 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.

Note Added 9:10 PM:  The SPX remains under the 50-day MA for the first time in five weeks. The 100-day MA is 1954.50 and price bounced from the 100-day in early August when President Putin's words created the catalyst to begin the stock market rally move. The 150-day MA is 1924.23. As listed above, the downside target using the band squeeze move is 1930-1940. Strong support is at 1951 and 1924. Mixing all this together a confluence is formed at 1951-1955 and if that fails, a move to 1924-1930 may be in the cards. First, the bears would have to break down through the 1961-1963 support gauntlet.

No comments:

Post a Comment

Note: Only a member of this blog may post a comment.