Weekly time frame:
- Negative price action
- The loss of 2085 has ignited selling pressure causing a potential false break out (Close below the previous December high)
- As SPX is approaching a support zone (2064-2061) it will be interesting to see what kind of bounce Bulls are able to achieve
- If the highlighted support zone does not hold the next potential reversal zone is located at the 20 wma = 2052
- So far I maintain the scenario of an Ending Diagonal. If this is the case the lower blue trend line MUST hold allowing another and probably last up leg to new ATH
- Weekly oscillators are worsening. Both the Stochastic and MACD are testing the signal lines. If Stochastic loses the 80 line the selling pressure would intensify
- The NYSE Summation Index remains a major concern. We have a new Sell Signal. Usually a bearish cross remains in force for an extended period of time. Probably if SPX is involved in a topping phase this sell signal will not be erased or of it is cancelled it should display a negative divergence if another up leg is in the cards
- Deepening in the analysis of Breadth Indicators we have:
1) The McClellan Oscillator is displaying strong downside pressure but it has not crossed yet the oversold line. A drop below 80 would substantially increase the odds of a tradable bottom:
2) The 10 dma of the NYSE not either has crossed the oversold line
Therefore probably next week we should expect back and forth price action until oversold extremes are reached.
Daily time frame:
- Since the current decline is not impulsive odds should favor a Zig Zag from the February low. If this is the case the current pullback is the assumed wave (B). There are three possible support zones where it should bottom:
- Range: 2066- 2062 (0.382 retracement - 50 dma)
- Range 2054 - 2046 (Lower Bollinger Band - 0.5 retracement - Gap that can be filled)
- Blue trend line (2040 ish)
- A potential oversold bounce should not breach the resistance zone 1 = 2085
- Daily Oscillator have a pretty nasty look. Above all the MACD bearish cross and the RSI loss of the 50 line. The RSI (5) is already oversold but I would wait for the Stochastic to cross the oversold line in order to look for a long setup
60 minute time frame:
- We can observe that the current decline is clearly corrective hence the scenario of a wave (B) pullback should pan out
- There is a potential Head and Shoulder with a measured target at 2056
- If the measured target is going to be fulfilled any oversold bounce should fade below the neckline of the H&S
