$SPX Daily with potential retrace to 1820

INDEX:SPX   S&P 500 Index
427 12 6
I follow about a dozen breadth and other indicators and the vast majority are flashing extreme oversold readings so don't be surprised to see a major bounce come Monday and maybe into Tuesday.
Here are a few key ones:
Close to 90% of Friday's volume went into declining issues.
$TRIN closed at 2.05 and this indicates massive selling and a washout of selling.
$NYUPV closed at 74 when any reading below 80 indicates extremely oversold.
$NYUD:$NYUPV closed at -10 when readings at -12 usually indicate the vast majority of selling is done. In this case, -10 is certainly enough to initiate a bounce.
The daily $NYAD, not to be confused with the cumulative $NYAD, dropped to -2252 when any reading in the -2000 area signals an extremely oversold market..
And there are a couple of others, but this should be enough to initiate a bounce.

A 50% retrace of the move down takes $SPX             back to 1820 and into the consolidation zone. If $SPX             can get traction there, then we might see a move up and out of the consolidation zone, but, at the first sign of weakness, those who didn't sell or get stopped out Friday and are worrying over the weekend, are likely to sell as soon as it becomes clear that the market isn't going back to recent highs, at least not anytime soon. That selling, should it materialize, is likely to push $SPX             down the next support area at around 1770             . However, this is not a very strong support as $SPX             only spent a few days there before moving higher.

I have no idea about whether or not $SPX             is headed lower come Monday or after a bounce, but if $SPX             cannot hold on to any highs it might achieve and then should drop below this near term support area around 1770             , then the next level of support is the support zone between 1646 and 1627. Unlike 1770             , this is major support as $SPX             moved out of the area in September, came back to in mid-October, and then took off from there. Buyers who have been kicking themselves for not getting in the first time $SPX             got down in the low 1600's will likely be waiting there with cash in hand. And if we do happen to drop down to the low 1600's then shorts, who will be very aware of the importance of this area, are likely to buy-to-cover there, just to be safe, and their additional buying will be enough to stop any further declines.

Right now, this is just the potential of the potential and little more than pure conjecture. For all I know, buyers will storm in Monday and push the major indexes up to new all-time highs by the end of the week. After all, this is what has happened like clockwork since March of 2009, with few exceptions, and we have the FED meeting and AAPL             & GOOG             report. At the same time, the markets have not seen a 10% correction in almost two years so maybe it's time we had one.

Except for NUGT             & JNUG             , I'm in cash so my personal strategy is to wait and see if $SPX             can push back into the consolidation zone that runs from about 1811 to 1850 and then break above that zone. If $SPX             can do this, and especially by the end of the coming week, then that will be a major sign of strength and a shot of confidence to the market. Yes, I'm giving up a lot of ground especially since 'buy-the-dip' has worked so well over the past nearly 5 years, bu tin waiting for this kind of confirmation I would feel that being long is once again the place to be. Right now I just don't see it as I think any bounce we get this next week is going to be sold into. However, the proof will be in the pudding.

GL in the week ahead.
prolly git a little lower so they can tap the moving average, then your bounce come into play. The vicious angle of the spx candles are telling, which i had previously predicted, but as i said and you have calculated, they may not give up 16K nor 1800 so easily. They will not... we will wave up in a test ....But me thinks this tells us all that somethin new a comin... My master wave line is now above the trading range... and it looks like we now trend down and trade up to it... then fall as the ma curves down and the market decines or zig zags inside moving averages. Be careful with them gold miners, my stuff says they pull back to 50ma retest. that said, markets fell almost too fast, and the bounce will be like a basketball hitting the pavement at great velocity... but then we fade down. as always, your analysis is valuable. I made money on the market drop but did a stupid day trade in xiv and am losing on it. long from 34. when vix ends with solid candle... it usually fades.... thoughts?
I don't know how frequently you visit the DXD board so what I write here may be a repeat.

The December lows are 1775.32 (close) and 1767.99 (intra-day). The intra-day low was the result of a bounce off the SPX 50 DMA. IMO, a break below the Dec intra-day low without a decent rally occurring first would be bad news, for longs anyway.

The SPX is well below the 50 DMA and lower Bollinger Band. The last time we had a situation like this (SPX close on lows well below the 50 DMA and lower BB) it washed out the next trading day. The ES first bounced overnight, but faded before the open and opened near its highs. It then went down in choppy fashion for most of the morning, bottoming at 11:23.

The SPX does not have to go down to the December lows to turn. In fact, bottoming above the lows would tell me that some type of move back up will occur.
RedQueenRace RedQueenRace
Don't know what happened there. Was trying to copy/paste to move something around and a Ctrl-V paste operation caused the above to post prematurely.

In the gap area I was trying to provide the SPX lower BB and 50 DMA tag points for Monday should a ferocious rally develop. Lower BB = 1805.51. SPX 50 DMA = 1813.43. Not saying it will get there. I'm just keeping them in mind should this turn.

Take a look at the action around October 8-9 of last year. A similar situation existed on the 8th (close below the 50 DMA and lower BB). It washed out and reversed on the 9th. Also note the closing RSIs of the SPX at that time versus where we are now. Repeats aren't guaranteed of course but there are patterns I see over and over again in the market. I look to take advantage of them and if they don't occur, well, there's always stops.

This is the first sell-off of 3% or more since that October 9th low. At the all-time high, the SPX had rallied 12.41%. That's very extended for a bull market that is this mature. The big sell-off is coming but I do not know if we double-topped or will go back up and top with a blow-off move. i was hoping for the latter to get heavily short but right now it simply made a slightly higher high and while the ES made a new full session high at 1845.75 it never took out the 1846.50 contract high.
RQ, on October 8th, $NYUPV closed at 76, $NYUD:$NYUPV closed at -7.41, and Zweig Breadth Thrust closed at 40.08, and the 5EMA on the $VIX rose to 18.5. These were all giving extreme oversold readings, much like those from this past Friday. The difference between October and now is that we have this huge overhanging margin debt, which everyone's been talking about for months, earnings warnings are at an all time high, we are now exiting QE, the RSI's on the monthly $SPX chart in December was at levels not seen since the 1999/2000 and 2007 market tops, and the P/C ratio closed at 0.92 on Friday which is still in the bullish zone so there is just no fear in the market. If not for the immediate above, then the fact that we became so extremely oversold on Friday would be looking like the buy of the year. And it may yet prove to be.

The breadth indicators I follow have never been wrong before and they have only been early once or twice since March of 2009. Fer instance, they gave a sell climax signal on May 17th, 2012 with the $SPX off 19.94pts that day at 1304.22. That proved early and though $SPX did rally up to about 1400 over the next few sessions, it rolled over and dropped to 1278 on June 1st, with 1278 being within a point of the low of the year. On that day, breadth indicators flashed another extremely oversold market and over the next several months $SPX would rally nearly 200pts from there before rolling over in late October. I think that's what we're going to see: a false bottom now with a convincing rally over the next few days, and then the market will roll over followed by the real bottom in a few weeks.

The problem with the above two scenarios is that we became super extended on the monthly charts of all the majors and we have rallied nearly non-stop for almost two years. The market has been behaving like a money machine and, contrary to popular belief and especially to those who weren't in the market in either late 1999 or late 2007, it's not a money machine.

Anyway, regardless of my current bias, the market is certain to let us know its true intentions perhaps by the end of the coming week and the market likes nothing better to make fools of those who would attempt to divine its movements.


As you know, i"m pretty short-term oriented. But if you want another negative to add to your list include what is going on in the emerging markets. Their currencies and bonds are getting hit and if these keeps up I think it is only a matter of time before what started in the periphery spills over into the core, just as the 1998 crisis started in Thailand.

I've been waiting for the NYSE to update the margin debt for December. It usually happens around the 25th but was not updated by Friday. I expect it to come out Monday and will update on the DXD board when it is out.

Thanks for taking a look at the October action and providing the additional information.
i agree... spx will make a run up to 50 sma... it may faze through it, or not make it... but near 1800 or slightly above... short it, as a greater correction cometh... weekly and monthy charts can clear the path to seeing how much downside there be....
Hi trucks,

Don't know if you caught it but there was very unusual action in the ES during the 4:30 to 5:15 pm EDT trading period today (1/28/2014).

During the regular session the ES topped at 1788.75, 1 tick above the 1788.50 high it made on the rally back off the low.

4:30 - 5:15 is usually a fairly quiet period.

Not today. During that period the ES obliterated the 1788.75 session and 1792.00 day's high (made overnight). I cannot recall seeing a move this big in this time period. As I will mention on the DXD board tomorrow in my write-up, there is usually a monster up move day following a wash-out bottom. If this rally holds up it suggests to me that tomorrow will be that day. The ES has traded above 1800, though it has backed off.. The SPX 50 DMA would be tagged at 1813.46. Indexarb does not have the premium updated yet (was -5.64 today, but should increase (less negative) with today's up move) but the ES fair value equivalent should be somewhere between 1807.50 - 1808.00.

NYSE December margin debt was updated at their site today. A new record, of course. $444.93 billion versus $423.70 billion in November.
RedQueenRace RedQueenRace
Clarification. I wrote:

"During the regular session the ES topped at 1788.75, 1 tick above the 1788.50 high it made on the rally back off the low. "

I meant the 1788.50 high made yesterday (1/27/2014) after the ES bottomed at 1767.00. Today it was stopped one tick above that high.

FOMC announces tomorrow. More fun watching the market gyrate over a useless statement.
RedQueenRace RedQueenRace
Well, so much for that rally holding up. Back to a low in the lower 1780s as of 7:30 this morning.
RQ, yeah saw the action and read the news about surprise about the interest rate hike in Turkey. When I turned off my computer last night ES was trading at 1798/1799 and I figured that when I got up this morning that the ES would be up another 10pts. Imagine my surprise. DAX, FTSE not down much so this is all Fed induced.

Yeah, so no bounce but watch for some kind of mega pump on the announcement. ES low at 8:35ET is 1777.50, which it just hit. We have 400k contracts and that is a lot for this hour.
CurtisM Mikke2130.
Mike2130, thanks for your interesting comments. I don't know anything about Wolfe Waves and the market probably doesn't either. Let's see how it goes in the coming days.
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