Hello traders and investors! It is Friday, and as usual, let’s do our Multi Time Frame Analysis (MTFA) on SPX, starting with the hourly chart!
The momentum is still bearish for the index, but the support around the red line (3329) is holding the price pretty well. But SPX is doing descending top, meaning the buyers are not strong enough to keep the prices up.
What could make me believe the bulls are gaining the upper hand again? When the 21 ema works as a support again, instead of resistance. It will be a great start.
Now, let’s see the daily chart:
When SPX lost this trendline, we could tell the bull trend was losing strength. The thing is that the recent movement on SPX could be a Dead Cat Bounce: A quick recovery to the 21 ema (which worked as a resistance) to resume the fall.
This will be true if SPX loses it support in the hourly chart, which will trigger a pivot point with a target at the red line in the daily chart (3280). Unless we don’t see a clear reaction, this is the natural movement for SPX.
Now, to finish our study, let’s see how the weekly candlestick closed today:
The weekly chart is giving some top signs, although the trend is still bullish. The thing is that SPX did a Dark Cloud Cover candlestick pattern, which was triggered this week, and it closed under the yellow line, which is the previous top.
Since SPX is losing strength on every time frame, the weekly chart suggests a pullback to the 21 ema, or to the purple line at 3232, which is near our target in the daily chart (3280). So, this seems to be an important price level for SPX.
These are the targets and scenarios we can work with the index, and if you made it this far, please, support this idea if it helped you! And I invite you to follow me to keep in touch with my analyses. Every day, I’ll be here to update you about the market, and you may find something helpful around here.
That 2nd bearish candle from this week shows even more weakness than the pullback in June after that FOMO rally. There was strong bounce off that bottom, but not this time.
I have a similar analysis based on waves and many of the same things line up. One thing that I have noted looking at previous rallies and corrections over the years, is that the minimum correction after a rally usually pulls back to at least the 0.618 fib level from the top (ATH = 1.0, March bottom = 0.0 in this case). That is a hair cut of 30% or so. You can see a nice example in May 2019. The rally from June 2019 to Aug 2019 also follows that. If you believe that, then in the coming weeks or months we should see a pull back closer to 3000-3100. That would just be a little under your purple line and would seem to just break the 21 EMA (just like May and Aug 2019). If your case holds as it does not break down as low as I expect, then that could be a major indicator that FOMO is ready to get going again and test or push to a new ATH.
FYI, there is a small gap up in the 2H around the beginning of July that has not been filled yet, if you track that kind of thing.
milty-friedman-3
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@Dr_Roboto, stimulus gave the june bounce energy. we can sell off until that news hits.. just in time for retail to get all those puts..
Hello. While I agree with your target points and am bearish in the coming weeks, I and others have noted a potential inverse H&S forming, with a bounce off a double bottom. One could argue this reversal began yesterday around 1:30pm, when Nasdaq closed a gap from July 31-Aug1 (essentially erasing all Nasdaq August gains for a brief moment). What do you think?
That 2nd bearish candle from this week shows even more weakness than the pullback in June after that FOMO rally. There was strong bounce off that bottom, but not this time.
I have a similar analysis based on waves and many of the same things line up. One thing that I have noted looking at previous rallies and corrections over the years, is that the minimum correction after a rally usually pulls back to at least the 0.618 fib level from the top (ATH = 1.0, March bottom = 0.0 in this case). That is a hair cut of 30% or so. You can see a nice example in May 2019. The rally from June 2019 to Aug 2019 also follows that. If you believe that, then in the coming weeks or months we should see a pull back closer to 3000-3100. That would just be a little under your purple line and would seem to just break the 21 EMA (just like May and Aug 2019). If your case holds as it does not break down as low as I expect, then that could be a major indicator that FOMO is ready to get going again and test or push to a new ATH.
FYI, there is a small gap up in the 2H around the beginning of July that has not been filled yet, if you track that kind of thing.