INDEX:SPX   S&P 500 Index
702 8 5
Back in May, with $SPX             extended well above its 20MA and with negative divergence in the CCI and with the RSI at or above 70, $SPX             dropped, on an intra-day basis, 120pts. A similar set up in August led to a nearly 90pt drop. Again in mid-September with the same kind of set up, $SPX             dropped about 85pts.

If you catch my drift.

We entered into this same kind of situation on October 29th with the RSI at 70.55 and a non-confirmation by the CCI and I am suggesting that we're about to see the same kind of pull back ranging somewhere between 80-100pts This pull back will take perhaps two to three weeks to complete and will take $SPX             into the high 1600's, at minimum. IMHO, of course.

As you can see on the chart, $SPX             is still inside the trading range that it's been in for the past two weeks, or so, and while there may be some kind of bounce on Friday, today's high volume indicates distribution by large players. These large players aren't likely to re-enter the market until they're fairly certain that the dust has settled and that might not be for several weeks.

There really isn't a 'sell' signal for $SPX             yet as there have been no bearish crosses of MA's. Some might think that $SPX             just came down for a test of the 20MA, which it often does, and now back to the rally. And perhaps I'm wrong in looking for an additional 80pt drop from here, but I don't think so.

All IMHO, and I could be totally wrong.

GL
I'm catching your drift..... BUT!!! We have a very rare situation today,which is an hourly buy signal on the day before employment. It's very HIGH RISK due to this is also the signal we got on the Flash Crash in May 2010 and also the signal we got on the thursday before employment in Aug 2011. It may work, the last time we had it, it did in Aug 2012, but we had been falling for 4 days. Safe trading ;) BM
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QuantitativeExhaustion PRO WallStScalper
3 years ago
We dropping Monday? Veterans Day

bond market closed, equities open for business. Might take a stab early on GE for some cheap puts Monday morning
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CurtisM
3 years ago
I use a 60min chart to determine when the markets are oversold enough to generate a fresh buy. That happens when the RSI dips below 30. Conservitavely you would wait for the RSI to rise back above 30 for the stock in question. For QQQ & IWM, the RSI on their respective 60min charts are well below 30 so they are technically oversold. However, for SPY & DIA this is not the case so they will need more downside before the RSI tags 30. This need not happen tomorrow or Monday. For the last pull back we had in mid-October, the RSI dropped below 30 within a couple of days but this only initiated a bounce and SPY did not have a bullish EMA cross. It then dropped for another 2 weeks at which time the RSI on the 60min chart dropped well below 30 and that was your bottom. Confirmation came when, per my criteria, the 13EMA crossed up through the 34EMA and the rest is history.

That being said, you could be 100% right and I could be 100% wrong. That's the beauty of the market. You never get to see it out of the front windshield. You only get to see it out the rearview mirror.

GL
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BEI
3 years ago
Hi CurtisM, But what just happened friday??
In my books this comeback has led me to consider a higher high scenario but does not affect daily and weekly charts and the possibility of price correcting soon. Those things takes some time but the play is still the same. Considering this i have two scenarios.

1- Price open flat / gap up and they spike up to 179-180 area (completing ABCD pattern since 2009) and play the long awaited 10 points+ correction we have been waiting for a while, thus making work, as always the divergence seen on the charts today.
2- Price gap down and continue its selling pressure, weekly candle is a hanging man and could trigger the short side if next candle prints under 175..

My only concerns remains the 1816-1820 area being 1.61 projection between 2007 high and 2009 low.
Either way the question is not where but when, i think that latest action is just postponing the inevitable and as soon one of underlining patterns is complete we will have our short side clear, at least for a reload maybe more depending on rapidity and macro. Cheers!
snapshot
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First need to see a break above previous high. We might not get that.
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BEI QuantitativeExhaustion
3 years ago
scenario 2- gap down < 176.5 candle closes ,175 and confirms weekly hanging man. I am just evaluating any play, everything is extended so you never know. I think the main reliable indicator at this point is Gold bouncing form lows and rallying very strong and VIX above 14. between now and then just messes your mind avoiding inevitable.
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BEI QuantitativeExhaustion
3 years ago
Also, it's important to note that life expectancy of prices above BBand weekly is very low, and right now the band is at 177.64 and flattening...
snapshot
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Dopam
3 years ago
Nice divergence. Is this it for the bull ride?
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