Friday, October 10, 2014

SPX Daily Chart Downward-Sloping Channel Lower Band Violation

Lots going on with the SPX daily chart. The red lines show the negative divergence spank down that was described as it set up to create the September top, which occurred. The standard deviation bands squeeze out strong moves (thick arrows) and the last one was the strong move lower. Price has violated the lower band for many days during the selloff so a move back to the middle band, at 1976 and falling, would be expected at a minimum. Note how price recovered during this week's roller coaster ride but has not been able to touch the middle band as yet so it definitely remains on the table.

The middle band is the same as the 20-day MA at 1976 falling towards the 50-day MA at 1973. The blue lines show very strong S/R at 1973, 1960-1961, 1951, 1936-1937, 1928, 1924 and 1910. Therefore, a strong confluence forms at 1973-ish and will serve as a sturdy ceiling and battlefield if the bulls decide to run higher in the coming days. The 100-day MA at 1962 and rising is a key level where prior market bounces have occurred such as the August bounce, therefore, it holds street cred. The 100-day forms a confluence with the strong horizontal resistance at 1960-1961 so 1960-1962 serves as a strong gauntlet of resistance.The 150-day MA at 1931 has received multiple tests with price jumping up and down on this sturdy level but unable to make it rupture so this level is also important like the 100-day. A failure of the 150-day would send price to the 200-day MA at 1905 that has not been touched since November 2012, two years ago.

A mean reverison occurs as shown by the brown dots with price above the 20-day MA above the 50-day above the 100 above the 150 above the 200 so that is as good as it gets. For short-term trading, this height in price should be matched to when price tags the upper standard deviation band since that tells you to short the index or stock and your risk-reward is handsomely in your favor. Neggie d adds icing to the cake.

Watch to see if price remains in the downward-sloping red channel. Price should recover to take a breather so a test of 1924 support should occur and it should hold. If not, price is going to drop to 1910-1912 and if that fails big trouble occurs and a potential crash scenario is firmly on the table. So keep a close eye on 1936-1937, 1931 (150-day), 1928, 1924 and 1910-1912. At 1910-1912 the end of the world is near; at the 1898-1904 level markets may easily crash and go into free-fall. For today, bulls will try to take advantage of Friday positivity and lift the SPX back above the 1936-1937 and 1951 resistance levels. Bears are gunning for a failure at 1924 and will want to lose 1910-1912 to unleash market carnage not seen for years. 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 9:54 AM: The SPX tumbles to test the strong 1924 support printing a LOD at 1922.28 then jumping higher to the 1936-1937 resistance printing a HOD at 1936.98. Price is now at 1931.69. The SPX picks up where yesterday left off; the fight for the 150-day MA at 1931.19; the theatrics continue. Watch the S/R levels listed, the 150-day and the high and low prints today. Bulls win big above 1937 since price will seek 1951. Bears win big under 1922-1924 since price will seek 1910-1912 for a potential catastrophic failure. Keybot the Quant remains short. Reference Keybot's missive last evening. RTH, XLF and UTIL are all up today which is encouraging for bulls.

Note Added 10:57 AM: The SPX failed at 1924 support and dropped to test the 1910-1912 support printing a LOD at 1912.84 thus far today. Price recovers back above 1924 so the end of the world was averted, for now.

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