JDCryptoATX

Beginning of a Violent Crash for SPX?

Short
SP:SPX   S&P 500 Index
Looking at the SPX 1-month chart, I’m seeing some strong indications pointing at SPX being at the top of a potentially violent crash.

Evidence For – Indicators that Support SPX Being at the Beginning of Crash:

  • MACD Support Trendline: Broken with Some Distance – In the previous two crashes, the beginning of the crashes coincided with the MACD support trendline (red) being broken (with a reasonable amount of distance from the trendline). This has already happened on the 12 MA (cyan). Also notice, that both times in the past two crashes, the 12 MA (cyan) tested the MACD support trendline, found resistance, then dropped. Could see that play out soon.

  • RSI Wave 5 Support Trendline: Broken, Tested and Becomes Resistance – Though the 2000 crash didn’t create an Elliot Wave Pattern on the RSI, if we create a support trendline (pink) on the RSI that corresponds to Wave 5 on price, you can see this pattern of broken, tested then resistance occurs. 2007 is even clearer. To me, where we’re at now, looks very similar to 2007.

  • Price Wave 5 Support Trendline: Body of Red Candle Breaks Through – In the previous two crashes, the beginning of the crashes coincided with the price support trendline (pink) in Wave 5 being broken with the body of a red candle. In 2000, the price did not come back up to test the trendline as resistance, in 2007 it did, currently it’s on its way to test it for a 3rd time. Perhaps it will even test it a fourth time if it can’t breakthrough this time or perhaps breaks through briefly as it did in October/November.

  • RSI Correction Wave A: Distinctive “E” Shape - All three patterns create a distinctive capital “E” type shape (green rectangles) to start out Correction Wave A, with the bottom of the “E” defining the resistance trendline (purple) in 2007. Angle of the trendline in 2000 wouldn’t have been far off if drawn there either. While I’m guessing this is not a common pattern used in charting, it does seem to be a pattern.

Evidence Against: Indicators that DO NOT Support SPX Being at the Beginning of Crash

  • Bollinger Bands/EMA: No Bounce Off EMA – In the two previous crashes, the following occurred with the correction wave – 1) correction Wave A completed at the lower BB 2) shot up to the EMA (middle yellow line) 3) Bounced off the EMA - completing Wave B. This go ‘round, 1) and 2) occurred, but instead of bouncing off the EMA to complete Wave B, it blew right through it. Perhaps it will bounce off the Wave 5 resistance trendline (pink) though like it did in 2008 or perhaps we’re still in Wave A and need to test the lower BB again before starting Wave B.

  • MACD Support Trendline: 26 MA Hasn’t Broken Through – The 26 MA (purple) has yet to break through the MACD support trendline (red), even though the 12 (cyan) created some good distance. Not too worried about that though – the MACD on the daily chart looks poised for a crossover to the downside, and the 12 MA on the weekly looks like it’s ready to start heading down as well.

I’m not a pro trader (YET). This is not investment advice (AT ALL). I’m just a guy who has spent a lot of time learning about technical analysis in the past 18 months or so.

I would really appreciate any feedback, especially if you disagree with anything so I can see the other side or if find anything technically wrong with this chart that would help me improve going forward.

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