Saturday, 28 August 2010

16:11 BST - SPX Update: Weekly, daily and 60 min charts

Looking at the weekly chart (the last post of this is here), not a great deal changed with last week's action. I think it still looks more encouraging for the bear case than for the bullish case:

SPX weekly:

I won't go into any detail here since its all set out in the notes on the chart. The only thing to add is that the moving averages are getting into almost complete bearish alignment - at the moment, the 20ma is still just above the 50ma (and I do mean "just") and they're all pointing down. In addition, the 13ma halted the rallies we saw this week (price having spiked above it last week but closed below). That seems like bearish action.

However, despite this bearish alignment of the moving averages being almost complete and the indicators behaving in a manner which is consistent with a bearish outlook, we still haven't seen real confirmation in price action. That's what I'm waiting for to gain more confidence in the bearish case because, until we see price action confirm, there's always the risk of price moving suddenly in the opposite direction suggested and turning these moving averages and indicators around.

The daily chart hasn't changed a great deal either, but the indicators are positioned to move up from current levels, suggesting that there is scope for more follow through to the rally we saw on Friday:

SPX Daily:

The notes on the chart should be self explanatory. 

Again, the moving averages are configured bearishly and should provide resistance, along with gap resistance (see the 60 min chart below) and fork resistance, suggesting that we ought to see any further rally fairly well contained. 

However, with the indicators poised to move up, we're just going to have to see how they behave on any further upward move in price.  Just because they are positioned to move up or have already started doing so doesn't mean that the bear case is over. I've noted on the chart what I would like to see if any further rally we get is only countertrend and not the start of a major move up. It would be good for the bear case to repeat  what we saw from the indicators in May after the 25 May low, although for the bear case, I don't think we'd necessarily want to see a rally of that magnitude!

SPX 60 min:

Before the open yesterday I showed the 60 and 15 min charts which looked poised to put in bullish divergences against any new price low, which would likely lead to a rally whether on the bullish or bearish case. That's indeed what we saw.

The rally on Friday certainly caused some bullish looking action in the indicators - and yet, its not quite completey bullish.

For example, it was a near 30 point rally in SPX, but the RSI is still not at the bullish level of 66.67. The CCI is still well below zero. The MACD is below zero and on the directional movement indicator, the +DI line is still below the -DI line.

Price is now at resistance represented by the 50ma, a prior gap,  and the upper line of a pink fork that I've added to the chart since I last posted it.

In theory, we should see some reaction to this in the form of a pullback, but its not out of the question that we just gap up above all of this on Monday. 

Whatever price does, I'll be keeping an eye on these indicators to see what they might tell us about the character of the move. Again, I've noted on the chart what I think we need to see in order to favour the bear case.