$SPX Daily w/ potential Wyckoff upthrust candle 02/19/2014

SP:SPX   S&P 500 Index
446 2 7
You don't move 45pts in one week and not get extremely overbought. We even got a little more overbought on Tuesday with Zweig Breadth Thrust rising to 63.48 and the RSI's on the 60min charts of SPY             , IWM             , QQQ             , and others, staying well above 70. We needed a cooling off period and maybe today's decline is enough. A pull back to the 20MA is not uncommon after a run like the one we've just witnessed. I don't know that we'll get there, but if we do then it's going to be important that we stop there. If we don't stop there and especially if we blow through the 20MA on heavy volume , then look out for a test of the lower channel line around 1780...for starters.

Per Richard Wyckoff, an upthrust is a candle that rallies hard on heavy volume but drops back close to the starting point, putting in a long wick. This is a sign of distribution by the large players, who have to the ability to pump the market up, generate excitement drawing in retail investors, and then the large players sell into the pump leaving the retail investors holding the bag. To be clear, today's candle, because of the larger lower body, does not totally match Wyckoff's criteria but I'm going to call it an upthrust until proven otherwise. Confirmation comes with a close below today's $SPX             low of 1826.99, and it doesn't have to be tomorrow. If we close below 1826.99 before we close above today's high of 1847.50, then it's an upthrust and a clear sign that the large players are locking in profits and exiting to the cheap seats.

Just want to make note of the pretty clear inverse head and shoulders pattern on the chart and to point out that inverse head & shoulders patterns appear in down trends so this pattern should be considered a potential double top reversal pattern. If this does in fact turn out to be a valid double top , then confirmation comes with a close below the 1740 area. I won't wait that long to unload my UPRO             .

The bottom line is that we need to see $SPX             turn around and take out 1847 and then 1850 and keep going and we need to see this happen pronto. Otherwise, it is possible we've just put in a double top and we should be looking for support somewhere in the mid 1600's.

Be careful & GL
SPX failed to close above 1850. the 2 hour candle looks like an inverted hammer which is bearish. Your thoughts?
CurtisM Will Wong
Will, it's all about follow through. Today $SPX pushed well above 1850 but then sellers entered and drove prices back down. Some of those sellers could be those who held through the recent pull back but are in no mood to sit through another one. If selling at resistance continues tomorrow, then we could be in for a rough ride for a few days so it's all about what happens tomorrow and Wednesday as I think today's action can be somewhat discounted.

Thanks for your comments, & GL
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