Throughout the summer price action has enjoyed support from a well established support line since the correction in March. That trend line was broken yesterday and buyers were quick to catch the drop, which I suspect will continue in the days ahead.
The facts:
1) Price action remains in a uptrend. Market structure remains intact as long as higher lows are produced. A breakdown of 3200 would be the alarm that tells us the structure is broken.
2) Price action has moved to the bearish half of the Bollinger Band.
3) There is a notable 2-year bearish divergence formation on the monthly chart (below) between price action and RSI. Very bearish.
Can price action continue higher? For sure. Is it probable? No. Would I buy? Not if you were throwing money at me.
Monthly chart - bearish divergence
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Are you Robinhood trader? Do you see the dip? Are you tempted to spend spend spend? Please don't. Switch off the phone/computer - just walk away!
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At close on Friday Stochastic RSI crossed below 80 (orange circle) - look left - nothing every good happened following this cross down.
The monthly bearish divergence above is now match by a weekly bearish divergence in the chart below. Divergencies everywhere! Might be time to get a lifejacket whilst there's still time.
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Not since March has 5 consecutive daily candles closed under the 21-day Moving average. The power of looking left is the ultimate leading indicator. Ideally we'll see support become resistance with a rise in price action, but it is not necessary, just as was the case in February.
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Next target 3060 following the head & shoulders break down.
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Double top bearish divergence becomes evident on the 3-day chart. That's good enough for me. Can we get a bounce off previous resistance? Sure. Is it likely? Who knows. What do I know? I'm in profit and I'm claiming it!
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Obviously we're seeing a melt up at the moment. Be careful around 3720, we're approaching a trend with lots of confluence.
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Bearish divergence on price action at the moment. Be careful.
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Be careful - Price action at major trend line support / resistance.
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The monthly chart is printing an incredibly bullish signal at the moment. Hard to believe. So what's happening?
Price action has broken through resistance and now appears to be back-testing as support. If that support is confirmed at the month end - we're going to see fireworks.
Everyone is expecting a crash - is it possible the very opposite could happen? I'm starting to wonder!
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Price action breaks through resistance - a melt up now seems probable.
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S & P 500 will rocket tomorrow is the day closes on this candle.