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Friday, July 13, 2012

Daily update 7/13

That looked like panic short covering out of the gate today.  Lets see what the charts say about where we are.  Here is the daily SPX chart.

The trend lines are coming together into a triangle and price is moving into the apex.  We are nearing the decision point on whether the next big move is up or down.  There was a drop in volume today.  The price bar has gone to white so the short term trend is only neutral, not up.  I think the 195 minute SPY chart gives a better picture of where we are.

We made it up to the top red resistance line today.  Price bars are still neutral.  We closed above the 18 SMA, but need a higher close to confirm a break.  That will depend on whether we still have resistance here or not.  Here is the weekly SPX chart.

This makes four weeks in a row we have tried but failed to cross the 18 SMA.  There is a little bit of a wick on the top of this weeks candle, but I think it still probably qualifies as a hanging man pattern.  The last three closes have been in an 8 point range which is extremely small.  This indicates a stalemate between the bulls and bears for the last two weeks.  I suspect that will be broken next week since the triangle pattern on the daily chart is running out of room. 

Both breadth charts are much weaker then when we were last at this level.  If the market turns down again they could easily both go negative.  That did not happen this week.  Clearly we had people willing to buy dips the last few weeks, but not willing to push prices significantly higher from here.  The earnings and economic news next week could resolve the stalemate.  There is considerable room to both the high and low of the year which should become the price target when we resolve which way we are going here. 

In the short term we got above the 60 minute 50 SMA.  I think that is a good pivot to use on the down side. We are right at resistance so going long here is risky.  That is best done on a price dip with tight stops.  That weekly chart looks bearish to me so be careful.


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