Wednesday, May 18, 2016

SPX S&P 500 Daily Chart H&S (Head & Shoulders)

The sideways choppy market action continues chewing up bulls and bears alike. If you do not like the market direction, wait until the next day since stocks will move the opposite way. The blue lines show a head and shoulders (H&S) pattern in play. Keeping it simple for Keystone's simple mind, the neck line is 2040 and head at 2100 (the intraday top was 2011) for a difference of 60 so the downside target is 1980 (2040-60) if the 2040 level fails. Note the intraday lows from early March that create a strong downside support target for the H&S at 1965-1970. If price moves lower the 200-day MA at 2012 will create support on the way down.

The 20-day MA is 2072, the 50-day MA is 2057 and price is below at 2047. The year began at 2044 so the S&P 500 is only positive by 3 points this year. You could have went on vacation and ignored all the market drama this year and you would have not missed a thing. Pay attention to the 50-day MA resistance.

The MACD line and money flow remain weak and bleak hinting at lower lows ahead for price. The tiny red circles clearly show steady distribution taking place for the last six weeks. After stocks move higher one day, stronger volume comes in on the sell side the next day; this is institutions and funds handing off shares to the dumb money like Ma and Pa Kettle and Joe Sixpack. Amazon is printing record highs so many blindly confident retail investors are touting their stock market expertise at the office water cooler announcing that they have placed their entire life savings in AMZN stock.

The ADX is down to 14 verifying that the big rally move higher in the stock market is not a strong trend. When stocks tumbled lower to begin the year, the ADX ran above 25-ish which indicated that the trend lower in price was very strong. That strong downtrend petered out in late February as the rally began so you knew the bulls had legs. As stocks moved higher, the ADX tried to sneak above 25 as April began to signal that the upside trend was strong, however, it did not. According to the ADX, there is no strong uptrend.

The green lines show the possie d launch off the February bottom as forecasted. The falling wedge and oversold conditions also create the recovery move for stocks. The purple W pattern bottom is very powerful, especially since it formed under both the 50-day and 200-day MA's, and this proved correct with the SPX nailing the 2050-ish upside target in quick order. The red lines show the neggie d that created the spankdown off the top as forecasted. The rising wedge and overbot conditions also signaled the top. For the last two months, sideways choppy slop continues.

Watch the H&S neckline at 2040-ish since big trouble begins below. Bulls need to push the SPX above the 50-day MA at 2057 to celebrate. The FOMC Minutes at 2 PM EST (7 PM London; 8 PM Frankfurt; 2 AM Tokyo) may act as a pivot point today. 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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