SP500: Update

Outlook
2 weeks since my last SP500 post and the market is still undecided as to which way it wants to go. 



The 1300 level held well until last Friday when we saw an Intra-day low of 1286. Although we saw a recovery near the end of trading it still closed below this important level at 1295.2


So yet again the dominant trendline and 200eMA hold, but a concern to me is each swing high has been lower and is trapped between the 50+200eMA. 


We could however be witnessing the formation of a Symmetrical Triangle (Bullish) and I see no evidence of bearish divergence on the daily or weekly RSI. 





A quick look at the P&F chart (using closing prices) demonstrates the range-bound trading we have been witnessing since the April ’11 high. We need a close above 1360 to confirm the dominant trend is still on force, whereas a close below 1260 would warn of a reversal. 



So to summarise I still have a very mixed picture. On one hand I have bearish cycles, bearish monthly/weekly candlesticks and decline in stocks above their 5/50/200 eMA’s. 

On the other hand I have a bullish symmetrical triangle, no bearish divergences, a neutral balance between put/call options and the dominant trendline and 200eMA which refuses to be broken.

I don’t see a quick conclusion coming from the current market, so I’ll be sticking to short-term trades using support and resistance levels with oscillators and divergences. 

    
Sentiment
BPSPX (Bull/Bear ratio): 60.00 (Down from 69)

VIX: 25.25 – A relatively high reading (compared to recent weeks) implies fear in the market and increases the chance of a subdued market next week. 

A low reading represents complacency, which is when most people get ‘caught out’ by the market and a big move can occur. 



Market Breadth
All 3 readings have dropped significantly  from my past assessment 2 weeks ago. 

% Stocks above 200 sMA: 40.49% (down from 63.36%)

% Stocks above 50 sMA: 22.87% (down from 41.9%)

% Stocks above 5 sMA: 7.89% (down from 35.22%)

Above 70% is considered overbought and below 30% oversold.




On a personal note it is encouraging to see the cycles have held relatively well, and from a timing perspective that I anticipated the market to remain choppy and indecisive for a minimum of 2 weeks, as has been the case.  


Whether this is down to skill or pot luck remains to be seen, but whilst these swings highs remain bearish so will my cycle outlook. 


With recent swing highs getting lower it fits in with my original analysis that we should have seen a top on the the larger cycle, and for it to bring downward pressure upon the smaller cycles. 




Patterns


  • Potential symmetrical triangle forming on daily.
  • Friday’s candle is an inverted hammer (bullish warning) with a relatively larger real-body, and bounced off the 200eMA. 
  • Monthly Candles: 2x Hanging Men (Bearish) followed by a Shooting Star (Bearish).
  • Weekly Candles: Last week saw a bearish long real-body and a close beneath the 1300 level. 
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“Trade what you see, not what you think…”

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