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The State of the Trend

A few weeks ago we mentioned that two different cycles, connecting weekly swing highs and lows, converge at the beginning of March. The index price action which followed was a testament to their opposing effect. The 1820 low we were expecting held and the SP500 staged an advance to finish February barely lower than the close on January 30th.

This can be best seen in the monthly chart which, from a trend following point of view, has something to offer to both the pessimist and the optimist.

For those who view the glass as half empty and follow a MACD system tuned to the historical rate of vibration of the index, the trend turned in June '15, and remains negative to this day:

S&P500 Monthly Chart

For those who view the glass as half full, and follow a simple moving average cross-over system, the uptrend remains intact and the index is undergoing a normal correction which won't lead to a trend reversal:

S&P500 Monthly Chart 2

The combined interaction of both strategies can be seen here, and it shows that we remain in the caution zone:

S&P500 Monthly Chart 3

From a swing trading point of view, however, the picture is much less ambiguous, as the SPX is in an upswing in all three time frames (daily, weekly, and monthly).

The monthly SP500 upswing will remain intact as long as the index trades above 1962:

S&P500 Monthly Chart 4

The weekly upswing will remain in effect so long as the SP500 trades above 1910, while for the daily upswing to continue, the index needs to trade above 1950 and the 1 x 1 angle which is currently at the same level:

S&P500 Daily Chart

The last couple of weeks did wonders for bullish sentiment which reached exhaustion levels suggesting that a sideways/down move should begin shortly. This is likely to coincide with the next CIT date of March 7th.

Weekly Sentiment


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