With SPX now back near the middle of its 6-month range today and the situation still muddy, I decided to take a step back from the spending projections and EDT/EW patterns to look at basic technical indicators daily and weekly.
Daily Observations
1. Bollinger bands are the 4th tightest they have been in 1 year and the previous 4 tightest cases led to sharp moves of 4.4-10% in less than a month of which 3 were down and 1 was up. That would equate to ~100-200pts today or 1920-2020. Bands should tighten further until SPX breaks beyond 2080 or 2120, so a big move is likely within days based on this indicator alone. And, it has tightened considerably in the past week since 2078 was tested.
2. The 2 common elements that separated the 3 down moves vs 1 up move when bands tightened were (1) RSI 14 negative divergence and (2) a clear break of the 20dSMA by 1%+. Today in SPX, RSI has been diverging negatively since November 2014 including the 2126 high and the 20dSMA resides just above 2100 with price less than 0.5% below. This indicator suggests SPX needs to break last week's 2078 low to confirm both elements common to recent strong downturns.
3. Key moving averages (20,50,200) are flattening with price sitting below the 20 and on the 50, so the tide is much more susceptible than normal to turning strongly and a solid break below prices from 20 and 50 days ago (~2085 and 2100 respectively) might do the trick.
4. There is a lot of room below the 50dSMA to the 200dSMA (~2090-2030=60pts) and that allows for SPX to build a lot of momentum if the 50dSMA breaks at 2090ish.
5. Significant price-volume has built up at 2100, 2070 and 2000 with a big dropoff below 2070. This indicator alone suggests a break below 2070 may find some pivot support at 2040 or the 200dSMA near 2030, but better trading support appears to exist near the many July-to-February pivots surrounding 2000 which would be a piercing of the 200dSMA.
6. MACD crossovers and RSI touching 50 have also been common SPX turning points in both directions, but failed underside MACD backtestests, MACD dropping near 50 and RSI crawling just above 50 have generally been negative. Today in SPX, we clearly have a negative MACD crossover dropping near 50 with a mini failed backtest (not as obvious as I'd like to see) and RSI falling through 50 after generally crawling just above it for 6 weeks. Recipe for a strong turning point and 90% to the downside.
Weekly Observations
1. Weekly key moving averages are all aligned moving upward with price well above. Next key supports are near 2075, 2040 and the lower Bollinger band near 2010.
2. Weekly RSI has been negatively diverging since May 2013 including the most recent 2126 high. A 50-100pt drop would likely cause RSI to pierce 50 where support could be found.
3. Weekly price-volume also appears near 2075 and just below 2000.
4. Weekly MACD is downtrending with negative divergences and possibly forming a near-perfect failed underside backtest which would be potentially very bearish.
When I put the daily and weekly TA observations together, it appears SPX has not done anything notable to confirm a break of its intermediate or long-term uptrend. However, the weekly indicators are showing divergences and an MACD backtest that are supportive of a short-to-intermediate-term trend change within days/weeks while the daily indicators are in a much more precarious position suggesting a downturn could be imminent within hours/days. Both weekly and daily indicators seem to indicate 2075ish and 2000ish are the strongest support levels with mild support around 2030-2040. So, basic TA tells me odds favor an SPX drop near 2000 if SPX 2070-2075 is broken with possible action near 2030-2040.
That jives with my spending-induced pattern, price and time projections for a significant drop into mid-May but the EDT origin of 1820 may not be the target until weeks or months later. If SPX does not break 2070-2075 this week, one could still draw expanded EDTs above 2130 but conditions are ideal for a big drop now and could possibly be fixed if another large rally occurs. Good fortune.
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