Monday, November 2, 2009

SPX - Update 11.02.09 - Technical Play

Bears and the Bulls fought hard today with no clear winner. Though the short term bull picture remains some what intact; though mounting bear evidence is making me question the strength. Things are looking very similar to June 09 where prices broke below support before breaking the new resistance of 950 back in the July rally. If price patterns do repeat, we will see a retracement to the upside that will most likely fail to revisit 1100, and fall back down below breaking 1030 support within the next 2 - 3 months (one can calculate percentages from June's moves to estimate price targets).

July 09 Action vs Now:

So is this beginning of the end?:

For those calling the top at 1100, I would not be so rash. Confirmation of a bear trend will have to be seen with a break in 1000 - 1030 resistance along with new 50 RSI resistance and MACD re-visiting former lows seen from the end of 08 and the end of February 09. Though with that in mind, the last 3 pullbacks to the down side seen in Aug and Sept were on a much smaller scale indicating the current 1100 level has much more psychological weight than the previous lighter resistances.

Like I said before, I don't like to call tops when a bull picture is still somewhat intact, but with a long term falling RSI along with a falling MACD with widening channels indicates mounting bear evidence. All these indicators do not show any bullish divergence/convergence.

So what remains of the bulls? Higher highs and higher lows and perfect SMA formation. What is messing up the picture is the price action interacting with the 50 SMA. If this Perfect SMA formation of longer averages under shorter averages (50 vs 100 vs 200) experience cross overs I will be more bearish across shorter time frames.

I will wait for a pullback to the upside and mostly go in cash to play it safe in the short term.


** on a side note: upcoming dollar weakness may confirm the temporary pullback to the upside. Play the lead... Play the lead...

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