Monday, November 17, 2014

SPX 30-Minute Chart 8/34 MA Cross Diamond Pattern H&S Pattern Gap

The 8 MA is below the 34 MA, barely, signaling bearish markets for the hours ahead. Obviously, however, the moving averages remain in a sideways fight and have flip-flopped three times since Friday. The 8/34 cross is key since it tells you who wins going forward. Will the market bears hang on?

The blue diamond pattern is in play and price and the moving averages are all going sideways into the apex so a decision must be made; up or down. Diamonds can resolve as diamond continuation patterns where price consolidates and then moves higher, or, diamond reversal patterns where price collapses. More of the diamond reversal patterns typically occur but it is never a done deal out of the diamond pattern until you see price commit. The vertical center of the diamond is 14 handles from 2032 to 2046, thus the breakout to the upside, or break down, should run that distance. If price breaks out from here at 2040, the 2054 is the upside target. If price breaks down from the lower trend line of the diamond pattern, say 2038, the downside target is 2024 which is very strong support.

The purple support lines show where price gapped up creating an island that price remains on. On the way back down an island reversal may occur if price drops to 2015-2016, then immediately collapses back down through the gap to 2011 and lower in a heartbeat. There is also an H&S in play (pink lines) with head at 2046 and neck line at 2032, the same limits as the diamond pattern, however, the head and shoulders targets 2018 if the 2032 level fails. November began at 2018 and there are only 8 trading days remaining in the month.

The SPX S/R is previously posted with key resistance at 2046, the all-time intraday high at 2046.18. Support below is the all-time closing high at 2039.822038, 2035, 2032, 2030, 2024, 2016-2019 (November began at 2018) and 2011. So watch the 8/34 cross to see if the bears remain in control for the hours ahead, or not. Watch to see which side of the diamond that price breaks out; either above 2040, or below 2038This 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 10:25 AM: The drama continues with price bouncing back and forth between 2038 and 2040 now threatening to break out to the upside from 2040. Whoa. The European central bank rides to the rescue today. ECB President Draghi says that buying government bonds (sovereign debt) is an option going forward. The promise of more QE shenanigans pumps stocks higher. European indexes launch higher well in positive territory. The SPX pops up through 2040, 2041, and prints a HOD above 2042. The central bankers are the market. The dollar/yen is 116.48 so this currency pair ran higher from under 116 this morning reflecting a weaker yen which is used to buy stocks and send prices higher. This is why the US futures recovered into the opening bell and now the ECB does some more pumping. Keybot the Quant algorithm remains long and is tracking VIX 14.37 (use this number instead of VIX 14.21) and JJC 37.01 as lines in the sand. Bears win if VIX moves above 14.37 and volatility was above after the opening bell now falling back below to VIX 14.11Bulls win if JJC moves above 37.01. If the status quo remains, stocks should stagger sideways. Volatility is up and the SPX is up so one of them is wrong. Bears only need 25 cents higher for VIX and they will create a downside move for stocks. JJC is 36.73 moving lower today remaining in the bear camp hurting the bull case.

Note Added 10:44 AM: SPX 2038.94 back inside the diamond pattern. Surprisingly, the SPX is stalled despite the BOJ and ECB central banks colluding to pump the indexes higher. VIX 14.23 the bears only 14 pennies from victory at 14.37.

Note Added 10:46 AM: Whoa. Ho, ho, ho. Major decision is at the doorstep. Price is 2038.55. The 8 MA for the chart above is 2038.35. The 34 MA 2038.43. All three are within pennies of each other. The 8 is under the 34 so the bears are in charge for the hours ahead but this may change in the coming minutes. The SPX is likely going to commit to a direction right now. Watch the VIX since if VIX 14.37 and higher occurs, the down direction for stocks is guaranteed. If the VIX drops under 14 and moves lower, the bulls win. VIX 14.27.

Note Added 10:57 AM: 8 MA=2038.44. 34 MA=2038.45. Bears have the edge by only one single penny. SPX 2039.30 so that will help create a positive 8/34 cross. VIX is 14.26 so the bears still need one more dime before they can create strong selling pressure. The VIX has moved above the 200-day MA at 13.95 described on the weekend (scroll back to view that VIX chart or type 'VIX' in the search box at the right to bring the chart up) which is a feather in the market bear's cap.

Note Added 11:01 AM: The 8 MA moves above the 34 MA signaling bullish markets for the hours ahead (fourth flip-flop in two days for the 8/34 cross). SPX is 2039.80 still deciding whether to break out above from 2040 or to fail from 2038. VIX 14.21. The beat goes on.

Note Added 12:14 PM: The VIX moved above 14.37 creating market weakness but drops back under now at 14.28 allowing the bulls to recover. The 2035 support holds. For the 8/34 cross drama, the 8 MA is 2038.46 and 34 MA is 2038.39, so the bulls are in favor but only by 7 pennies. The stock market is exhibiting more theatrics than a Shakespearean play. Bears must move VIX above 14.37 if they want to stop the market upside. JJC 36.66.

Note Added 6:57 PM: The bulls punch the bears in the face winning the fight over the 8/34 MA cross on the 30-minute so bullish markets are forecasted for the hours ahead, however, the 8 MA is 2041 and so is the SPX price. So bears have one chance, after the opening bell on Tuesday, to push equities lower and push the 8 MA downward to create a negative 8/34 cross. If the bears do not succeed in the opening couple hours on Tuesday, they will fold like a cheap suit. As long as bears keep the SPX under 2041 they can curl the 8 MA lower. If price moves above 2041 the bears are in trouble. VIX is 13.99 so the bears could not hold the 14.37 level so equities recovered in the afternoon. A feather in the bear's cap is the VIX above the critical 200-day MA at 13.94 a signal for bearish markets ahead. If the VIX drops under the 200-day MA at 13.94 tomorrow the bears are toast. Price is trying to break out above the diamond pattern but the first couple hours need to play out on Tuesday to identify the firm winner. Something big is going to go down either through the night tonight or before the opening bell in the morning because the standard deviation bands are super tight on the SPX 2-hour chart. A squeeze move is likely going to send the SPX 20 to 30 handles in one direction or the other starting tomorrow. The central bankers are the market so if the ECB promises more QE overnight or if the BOJ destroys the yen and sends the dollar/yen above 117 the fix will be in and stocks will take off like a rocket tomorrow. If trouble flares up with Ukraine-Russia, Brazil or Japan, or ISIS, or other event such as Ebola, then the bears will receive the nod. If the geopolitics are quiet, you can use the VIX 200-day MA as your guide to tell you who the winner is when the opening bell rings.

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