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SP500: A Pullback is in Sight

Weekly time frame:

  • SP 500 has not been able to overcome the last obstacle (November peak) prior to the May 2015 all time high
  • The week ended with a Shooting Star. A short-term top could be in place provided last week low at 2073 is breached
  • If the Shooting Star is confirmed we have three potential targets: S1 at 2040; S2 in the range 2029 (50 wma) - 2020; S3 at 1989 (20wma)
  • In my opinion if a pullback is underway odds should favor a higher low, probably at the S2

S&P500 Weekly Chart
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  • The scenario of limited downside and a continuation of the rally from the February low with a 3-wave up leg could result in an Ending Diagonal, which would conclude the entire advance from the 2009 low

S&P500 Weekly Ending Diagonal Chart
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Daily time frame:

  • SP 500 has carved out a potential reversal pattern (Rising Wedge)
  • A confirmation is needed by breaching Friday's lod
  • If the reversal pattern is confirmed the pullback should bottom in the range 2020 - 1989

S&P500 Daily Chart
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  • The negative divergence of the RSI and the MACD suggest that momentum is waning

S&P500 Momentum Chart
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  • The % of stocks above the 50 dma is still overbought and it is displaying a negative divergence

S&P500 Stocks Above 50-Day Moving Average

  • The ratio VIX/VXV has dropped below 0.800 increasing the odds of a pullback

VIX:VXV Daily Chart

  • VIX has also carved out a potential reversal pattern (Falling Wedge). If the wedge plays out we have R at 16.81 and initial target in the range 18.58 (200 dma) - 19.14 (0.382 retracement)

VIX Daily Chart
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