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Monday, July 30, 2012

Daily update 7/30

Not much pullback this morning.  We went up and tested yesterday's high and failed to stay there.  Here is the daily SPX chart.

You will notice the chart looks quite a bit different tonight.  I removed the triangle trend lines since they did not make any sense with the current price action.  I put in a new trend line from the April and May highs using the upper tail created in May.  I think this is still a valid down trend line.  I have added some trend lines to the last few weeks of price bars that show a perfect upward sloping price channel.  As you can see we are at the upper trend line now.  The part of the price action inside those trend lines looks an awful lot like a bear flag.  If that is the case, we will eventually break that lower trend line.  We will just have to see how the price develops because it could morph into something else entirely before that line is broken.  The daily candle looks pretty similar to the Rickshaw man candle we had at the recent low.  We are the furthest away from the 6 SMA we have been for quite some time.  It is likely we will move back towards it or stall and wait for it to catch up to price.   Check out the 130 minute SPY chart.

We can see we are still in the lower part of the price channel we have been following.  There are some upper tails on the bars that indicates some resistance in this area.  Since we are at the upper trend line on the daily chart that makes sense.  Price is very extended from the 18 SMA and vulnerable to a pullback on this time frame also.

This rally has not been tested in any real fashion.  Until it is, we can't really assess the strength of the move very well.  How people feel about the future will determine whether they want to sell here or rush in to buy dips.  The economic data and the FED this week can make a lot of difference in what the market does.  Stay on your toes.


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