Thursday, 19 August 2010

12:19 BST - SPX Update: 15 min pitchforks and technical indicators

I've update the 15 min chart from yesterday to adjust the red down fork (the original was pretty much invalidated with yesterday's rally) and to add in the new upward fork I mentioned at the end of my last posting of this chart (see here), plus a smaller downward fork. Its cluttered, but it shouldn't be too difficult to see the various forks.

SPX 15 min pitchforks:

The upward black fork doesn't look like it is going to have a real influence on price since the rally into it failed to get to the median line, which is not bullish, and then broke down out of the fork late yesterday.

Yesterday's rally seems to have been a back test of the green fork which we broke down out of with the early decline. Again, the pullback from there doesn't inspire bullish feelings.

Yesterday's high is now the pivot which I'm using for the adjusted red down fork. We'll just have to wait and see once again whether or not this fork gets validated. If we just drop down into it towards the median line of if we drop a bit and then rally to the upper line and then drop back down, I would consider it to be valid and would expect it to have some further influence on price.

You'll see I've also sketched in a smaller downward fork in pink which, if we are going to drop, may be the fork that exerts the most influence on price initially. Its pretty much contained within the upper half of the red fork.

So, those are the forks to watch for the moment.

Looking at the indicators, you can see that they confirm what I mentioned in relation to the 60 min chart which I posted last night (see here), that the rally yesterday was somewhat weaker than the rally on 17 August. As I said in relation to the 60 min chart, there was no bearish divergence as such since price wasn't making a higher high while these indicators made lower highs. However, it does seem to highlight some underlying weakness. 

Of course, if we rally hard again, that may all work itself off, but for the moment, the chart suggests that if we do rally to a higher high (I discussed the possibility of this in relation to the 60 min chart) it may just be providing the opportunity for these indicators to set in actual bearish divergence against a new price high.

If we do rally, the bearish case will want to see price fail at the lowerline of the black fork and the upper lines of the pink and red forks, or thereabouts. Otherwise, as I'm sure you can see, there is another upward fork we can draw that may take prices higher. I haven't drawn it in, but it is based on the low made early yesterday, the high of the day and the low made at the end of the day.