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.
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.