SPX 30-Minute Chart 8 MA and 34 MA Cross Sideways Channel Potential Inverted H&S Patterns

One of Keystone's fave real-time charts to monitor is the 30-minute. Each candle represents 30 minutes of trading time. A week or so ago you see the market top identified by the red rising wedge, overbot conditions and negative divergene. The smack down occurs as forecasted starting on 10/18/12.  The 8 MA crossed down thru the 34 MA on 10/19/12 which locked in the bearish move ahead. The bears enjoyed the downside until oversold conditions and postive divergence formed on 10/23/12.  This bounced price from 1411-ish but note that the MACD line wanted to see a lower low for price after the bounce occurs.  That lower low occurs on 10/25/12 as the trading day begins and positive divergence is formed once again wanting to see price bounce, which it does from 1407-ish. But, again, the indicators are not in universal agreement with positive divergence. The money flow wants to see a lower low in price after the bounce occurs, and, price comes back down again. The tiny circle shows the 1403 print on Friday, traders testing this uber important support level for only an instant, the universal positive divergence was now in play so price was clear to move up in earnest which it did during the last half of Friday's session.

The darker green linenow shows the indicators with a long and strong profile, higher highs as price makes higher highs.  Therefore, the indicators want to see another price high, probably a couple of them at a minimum before the indicators can negatively diverge again.  The action is sideways for the last five days with important S/R levels at 1424, 1419, 1406 and 1403.  Price is set up to test the 1419 and perhaps 1424 levels early next week.  There are two potential inverted head and shoulders (H&S) patterns developing now shown by the neon green and neon pink bars.  The neon green bars show a head at 1406-ish, left shoulder at 1410 and neckline at 1420-ish so the target would be 1433-1435. Obviously the right shoulder would have to form during the trading early next week.  The neon pink inverted H&S is a larger potential pattern that has the head at 1406 and neckline at 1435-ish which targets the 1457-1463 channel above.

But first thing is first. Early next week watch to see how far the long and strong indicators can send price higher. The 1419 and 1424 resistance levels are very important. If the bulls move above 1424 they can easily move back up into the 1430's.  If 1419 is taken out to the upside, the neon green inverted H&S would be in play. The 1412 close on Friday can serve as a right shoulder.  A break thru 1419 would target the 1433-1435 area.  Markets are stumbling sideways and on the 30-minute time frame shows that price will want to make a couple higher highs, it is only a matter of if the 1419 resistance can stop the bulls, or not. If the bears can hold price under 1419-1420, this will likely lead to a move back down to 1403 to see if price wants to bounce, or die.  If bulls move up thru 1419-1420 they are on their way higher and if the 1424 gives way the bulls will enjoy a rally next week likely back to the 1430's. Thus, focus on the1419-1420 level as the trading circus begins next week.

Of course the most important aspect of this chart is the 8 and 34 MA cross, now within a hair of the 8 crossing above the 34 to signal bullish markets for the hours and days ahead. The Monday open is very important. If the markets are flat or higher, the 8 is gonig to pierce up thru the 34 to signal the bulls in control. The bears must look for weak futures overnight Sunday and a drop in the SPX at the opening bell so the 8 MA can drop lower and move down away form the 34 MA preventing the cross from occurring. Even if the cross occurs favoring the bulls, watch for the 1419-1420 as discussed, and also once the cross occurs the following two or four candles (one to two hours of trading) are important since the bears would only be able to reverse the cross with a strong move south in the SPX. Once the 8 crosses up thru the 34 and it remains for an hour or two, the bulls will be on their way to happiness for a few days. 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.