"No warning can save people determined to grow suddently rich" - Lord Overstone

  • 1 day Why Are Investors Overlooking Gold Stocks?
  • 1 day The App That Democratized Trading Is Now Worth $5B
  • 1 day Super-Cycles: Why Gold Is Set For A Breakout
  • 1 day U.S. Sanctions Russia For Election Meddling And Cyberattacks
  • 1 day Snap Shares Tank Over ‘Slap Rihanna’ Campaign
  • 1 day How Low Can Bitcoin Go?
  • 1 day Amazon’s Japan HQ Raided In Anti-Monopoly Push
  • 1 day Is Barrick Gold Close To Finding A Bottom?
  • 2 days Morgan Stanley’s Top 10 Short-Term Stock Picks
  • 2 days China: The Land Of The Ultra-Rich
  • 2 days Alibaba Soars On Reports Of China Listing
  • 2 days What Killed Toys ‘R’ Us?
  • 2 days SEC And IRS Take An Aggressive Stance On Cryptocurrencies
  • 2 days Bears And Bulls Face Off In Gold Markets
  • 2 days Bitcoin Is Winning Over The Housing Market
  • 2 days Markets Slide Sideways As Trade War Fears Linger
  • 3 days Why Aren’t Millennials Investing?
  • 3 days Bitcoin And Banking: The Next Mobile Payment Revolution
  • 3 days SEC Cracks Down On Silicon Valley’s “Disruptive Tech”
  • 3 days Wyoming Eliminates All Taxation On Gold And Silver
Markets Surge Despite Tillerson Exit

Markets Surge Despite Tillerson Exit

Markets are enjoying a less-threatening…

What Killed Toys ‘R’ Us?

What Killed Toys ‘R’ Us?

In another blow for America’s…

Markets Slide Sideways As Trade War Fears Linger

Markets Slide Sideways As Trade War Fears Linger

Despite technology stocks hitting new…



My goal is to establish the most likely path that the price of a particular asset will undertake and profit through ETF instruments both on…

More Info

Weekly Technical Analysis


An Engulfing candlestick has followed the "FOMC" weekly Shooting Star. It could have got worse if bears achieved to close the weekly gap at 1687.99 However despite the weekly negative price action bulls were able to save the gap and avoid an eow print below last week low.

We don't have a bullish candlestick, hence the decline form the September 19 low is probably not over yet.

A weekly close above the 3 wma which stands at 1697 would improve the price pattern while if the weekly gap does not hold the next support is located in the range 1579.50 (10 wma) - 1576 (5 wma).

The moving averages set up remains bullish (slopes are positive)

SPX Weekly Chart
Larger Image

As I have discussed in the weekly update on September 16 we have visible evidence of slowing momentum. The bearish divergences of the weekly RSI and MACD, % of stocks trading above the 200 dma, Summation Index and BPI are strongly suggesting that price could be involved in the late stages of the corrective pattern unfolded from the 2009 lows.

I also suggested that if we are approaching a major top price could be forming an Ending Diagonal. In a Double Zig Zag (it is my preferred count of the advance from the 2009 lows) an Ending Diagonal appears as the final wave (C) = (Y).

If this is the correct ending pattern the current pullback is the wave (IV), but it needs to be larger. If the 50 dma holds the Ending Diagonal option will not pan out.

SPX Daily Ending Diagonal Chart
Larger Image

The RSI of the Summation Index has entered the overbought zone. Therefore as long as the bullish cross over (Index crosses the 10dma) issued at the beginning of September is not reversed during the current pullback, it is obvious that odds favour an ending move more than the beginning of a new one.

NYSE Summation Index Daily Chart

In order to maintain this scenario alive, we need to see an improvement of the McClellan Oscillator, which is dangerously approaching the zero line.

The absence of a positive divergence of the Oscillator and the MACD histogram last Friday suggests that the correction is not over yet. It looks probable that, either after a bounce or straight away, the Zero line will not hold. If this is the case a bullish set up could occur with a drop below the lower Bollinger Band (A positive divergence of the MACD histogram would be welcomed).

NYSE McClellan Oscilator  Daily Chart

Daily Momentum is also concerning, above all if next week the MACD confirms a bearish signal cross. If this is the case more weakness should be expected probably until the Stochastic and the RSI(5) enter their oversold zones.

SPX Momentum Chart
Larger Image

Therefore it seems likely that we need to see extremes in short-term breadth/momentum indicators (Better if with positive divergence) in order to consider feasible a tradable bottom.

Bulls have another issue with the IHS of VIX. Friday's spike has most likely confirmed the pattern (As long as the neckline is not breached). The IHS has a target at the upper Bollinger Band. If target is reached we could have a buy equity BB signal set up (Close above the BB followed by a close below it).

VIX Daily Chart
Larger Image

Two things could favour a bounce:

  • CPCE has flipped from bearish (On Thursdays eod print) to bullish (Friday's eod print).

CBOE Options Equity Put/Call Ratio Daily Chart

  • Daily Hammer candlestick. Despite price has reached the target box delimited by the Fibo. retracements, I remain sceptical that the pullback off the September 19 high has run its course. However we cannot rule out a short-term bounce which should have an upper limit at 1709.67.

SPX Daily Chart
Larger Image

Short-term EWP

In my opinion we have two potential patterns:

  • Ending Diagonal. Barring a truncation it needs one more lower low (Caveat: the wave iii of the assumed ED is marginally larger that the wave i).

SPX 60-Minute Ending Diagonal Chart
Larger Image

  • Triangle: We should see an impulsive decline off last Thursday's gap down. The theoretical target is located at 1667.

This scenario should conclude the corrective pattern from the September 19 high.

SPX 60-Minute Triangle Chart
Larger Image

Next week seasonality is bullish.

The economic agenda has plenty of data to be released, the main one is NFP next Friday.


Back to homepage

Leave a comment

Leave a comment

Sign Up For The Safehaven Newsletter