CurtisM

$SPX Weekly, 05/16/2014: Two consecutive indecision dojis

INDEX:SPX   S&P 500 Index
377 12 11
The weekly chart of $SPX             looks fine. It's moving above a rising trend line and above the MA's that I use in the weekly time frame. But we have two indecision doji's on the chart and they mean exactly that: indecision. $SPX             is stuck between a high of 1902 and a low of 1862 and depending on how we close out the coming week then that is likely the way we're going in the short term. Based on what follows, I do think we are headed lower on the week, but not necessarily on Monday or Tuesday.

Since the lows of 2009, every time the RSI in the weekly time frame has climbed above 70, a pull back of one degree or another has followed. In the early winter and early spring of 2011 we had RSI negative divergence and this preceded the largest pull back in the $SPX             since the 2009. In December of 2013, the RSI rose to 74 but since then each new closing high has come with a lower RSI setting up negative divergence. So we've had the RSI above 70 several times since December 2013 and are currently in an RSI negative divergence situation. This suggests that the indecision doji's will be confirmed to the downside.

Further and in the daily chart , $SPX             is in the grasp of a Keltner Squeeze as the Bollinger Bands continue to tighten. While the $SPX             doesn't have to go into a multi-day pull back because of the Keltner Squeeze, it has on several previous occasions and I'm expecting $SPX             to once again go into a multi-day pull back which will take it below the recent lows of 1862 & 1860.

Adding to the argument of a multi-day decline beginning next week is the fact that the Summation Index has already started rolling over indicating weakening market breadth. Next there is the fact that the 5EMA on the $VIX, thanks to some hard selling of $VIX call options late in Friday's session, has dropped to 12.62 and is deep in the froth zone. Also, and perhaps most importantly, the Cumulative Volume Index ( CVI             ) has really not made a new high since April 2nd while $NYA has put in two more closing highs, the last one being slightly more than 80pts above the high from April 2nd which is more evidence of weakening market breadth. And finally, since the beginning of May, the $TRIN has closed above 1.xx on 9 occasions with 4 of those above 1.xx closes coming on green days evidencing that every rally is being sold into. This $TRIN situation is very similar to the way the $TRIN was behaving going into the mid-January high.

So, based on the above, I do expect the market to remain weak throughout the coming week and end the week below the 1860 area. However, and extremely important, the market likes nothing better than to make fools of those who attempt to divine its movements and so I could be completely wrong. In other words, do your own due diligence.

GL in the week ahead.

Nice analysis. I liken the situation to looking out the window and seeing dark clouds. Does that mean it will rain? It increases the chance over clear blue skies, but it can remain cloudy for days and never manifest. I also see some possible canarys, but I guess we'll see.
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CurtisM FractalTrader
2 years ago
Fractal, until we get a real honest to goodness trend going, then as you say it might look like rain but never rain.
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stockSMASH
2 years ago
The SPX and DOW closed BELOW my 2 critical lines. WEEKLY AND DAILY. Market going down, just a matter of 1or 2-4 weeks. The decent will likely mirror the descending triangle that small caps took. Don't be fooled, market will fade... and that may be a great buying op once enough people dump shares so big boyz can pick them off for another run up to a descending algo line. Hazy Fade coming dudes. Then spill, then spill then more buying as interest rates remain so low that only the unexpected can change the likley run to 17 K dow. But not yet.
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CurtisM stockSMASH
2 years ago
Biff, I'm just thinking that the market has had plenty of time to let us know it wants to go up but these indecision doji's could be letting us know that it just can't go up and so will go down. If this does in fact happen, then I'd be looking at a minor pull back lasting maybe two weeks. By then we'd be looking at a red monthly candle which might be all it takes to get a real sell off going.
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claydoctor CurtisM
2 years ago
Nice post. The charts reflect the action, but the cause of the action... Looking out the window looking at the rain clouds, I just noticed the currency wars, which is the tornado spinning toward us. The core of that tornado is the Yen, the stronger it gets the more it tears apart everything in its path. IMO.
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CurtisM claydoctor
2 years ago
Claydoctor, I don't really follow the currencies but I do know that the Japanese would prefer a weaker Yen to stimulate exports.

Thing about charts is that charts don't make the market, the market makes the charts. Regardless of my chart analysis the market will do what it's going to do.

Thanks for your comment.
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RedQueenRace
2 years ago
Hi trucks,

Today (5/19) the ES pushed through and closed above the 50% retrace of the range defined by the low of the sell-off (1859.00) from the contract high (1898.50). That fib was at 1878.75. The ES touched that level exactly today at 10:28 am, then pulled back and traded at or below it until it broke through 39 minutes later.

After the ES broke above the fib, it was tested as support multiple times. The lowest the sellers could push the ES was 1 tick below (1878.50 at 12:38-40). The other re-tests bounced right off it exactly.

Right now it's looking pretty solid but I want to see the overnight and early action tomorrow. If it continues to hold and the ES makes higher highs tomorrow I'm figuring the trend is up. It could not push through 1883.00 late. But if the fib holds and it decisively gets through 1883.00, then short and short-related positions are probably in for more pain.
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CurtisM RedQueenRace
2 years ago
RQ, good to hear from you. I expected a green day today and one for tomorrow, as well, but then I expect things will reverse as we're getting frothy, again. I am looking for $SPX to fail before putting in a new high above 1902. However, should we push above 1902 on a closing basis with good volume, then my analysis is obviously wrong and we may be getting ready to establish a solid rising trend in the daily charts.

So I'm giving this to the close on Wednesday or a solid close above 1902, which ever comes first.
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stockSMASH
2 years ago
dow is a gone mother %$*^%*%* spx will break the 50 and we go to 200 ma. We got IWM short and we in da money
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RedQueenRace
2 years ago
Heads up on margin debt. The numbers are out for April and it was down significantly again.

This is what it looks like so far this year.

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RedQueenRace RedQueenRace
2 years ago
Don't know what happened there. Tried pasting in the data and it posted prematurely.

The numbers for this year so far (in millions):

January $451,298
February $465,720
March $450,283
April $437,155

For December 2013 margin debt was $444,931, so the latest number has dipped below that.

Meanwhile the market cuts its own throat with respect to tapering as the simpletons at the Fed will see no problems with this price action and will continue withdrawing liquidity.
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CurtisM RedQueenRace
2 years ago
RQ, thanks for that info. I guess you could read all kinds of stuff into that but it's still pretty high. No worries, though, market hasn't had a 3 week pull back in something like 9 months and hasn't had a 10% correction in almost 3 years. While I was bearish coming into this week, that was obviously wrong especially since on Friday we'll get pre-holiday trading that usually favors the upside.

They may be getting ready to pump $SPX to 1902 today so they can take off tomorrow and not worry about it over the weekend.
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