Saturday, 21 August 2010

16:44 BST - SPX Update: Weekly and Daily Charts

For the moment, there is still probably more for the bears than the bulls on the weekly chart in my view:

SPX Weekly:

You can see that price action is bearish in conventional and in pitchfork terms. 

In conventional techincal analysis terms, last week was a big down candle that completely retraced the prior week's gains as well as getting deep into the large up candle two weeks before that. Last week's reversal took place right at the 20ma and at prior pivot resistance. This week, price initially rallied up to the 50ma and simply collapsed back down again. That's not bullish behaviour.

In pitchfork terms, last week's reversal was at the upper line of the large downward black fork and could represent a confirmation of the potential validity of that fork meaning that it could well have future influence over the direction of price (you can see how large this fork is for yourself). We also closed below the median line of the red fork and this week confirmed that bearishness with an attempt and failure to get back above it.

What is required now for the bear case is a continuation of the move down, below the lower line of the upward green fork and towards the lower line of the red fork and the median line of the pink fork. If things are really getting bearish, the pink fork looks like it could provide a guide to the general path that price will follow as it moves down.

Looking at the technical indicators, the CCI still has not been able to get above the zero line and the RSI remains stuck around the 50 area and more generally below it than above it.

Last week, it looked like the MACD might get a bearish hook down around the zero line. It still continues to develop in this way.

The stochastic hasn't moved up as I would expect if this were a new uptrend and now looks like its stalling out at a not very bullish level. You can see the way it moved up from oversold/near oversold in the uptrend from March 2009. (see the two areas I've highlighted in green). The move up from oversold from July 2010 is distinctly muted by comparison. That suggests to me a counter trend move.

I don't think the daily chart offers much more encouragement for the bullish counts at the moment either:
SPX Daily:

Again, looking at the price action, you can see how this week's rally tried to get price back up to the 13ma and 20ma. It didn't even get to those levels before the downturn we saw on Thursday and Friday. In addition, with that downturn, the 13ma has crossed below the 20ma. Both are still above the 50ma, but they fell quickly this week and it may not take too much to drop them below the 50ma.

As regards pitchforks, my comments in relation to the red, pink and green pitchforks on the weekly chart apply here since they are the same. The lower line of the purple one (I had this as green on last week's chart but I've changed it so its clear its not the same as the green one on the weekly) provided reistance to the rally in the early part of the week and the failure to get back within it, following as it does, the failure of the third peak in the rally from the July low to reach its median line, is bearish.

As to the technical indicators, the CCI's lower peak on this week's rally confirmed the weakness in the rally in price. It looks like its headed for the -100 line which would be bearish.

The MACD histogram started to print higher low bars within the trough its formed with the decline since 9 August. However, the lows started dropping again with the delcine late in the week.

The rally in price took the RSI towards the 50 line, but it didn't quite reach it and turned down hard again.

The MACD shows no sign of turning up and looks more likely to accelerate to the downside if anything.

The weakness of the price rally is also reflected in the action in the stochastic which couldn't get anywhere near its 50 line before turning back down again. This is the type of action I'd expect to see during rallies in an overall downtrend.

So, for the moment, on these timeframes, the bear case appears to be in decent shape as far as price action and technicals are concerned. However, there's still alot more we need to see from price in order to feel more confident in the bearish counts (I've discussed this to a degree on the updated 60 min counts page), even those that are only bearish relatively near term, let alone the longer term bearish ones. Because those bullish counts are still on the table, its important to keep monitoring the action in price (obviously!) and in the technicals for any signs that momentum may be shifting from (currently) the bear case to the bullish case.

11:08 BST - SPX Update: 60 min counts page updated

I've updated the 60 min counts page - please us the menu tab above or click here.

For the really bearish counts in Options 1, 2 and 3, I've given some potential targets for the very next leg down, once what I'm assuming on these counts is a correction up from the 1063.91 low is complete. 

I've also explained why on Options 1 and 2 we really need to seeing these bear counts playing out now as we would expect, with deep, impulsive down moves. Ideally, I also want to see this under the count in Option 3, but its less pressing on that count  looking solely in terms of time (though it could start to become pressing soon).

On both the bullish and bearish counts, I've shown the channel that I'm watching to try to get an early warning of which of these might be playing out.