$SPX Bear Wedge - Managing another bear leg
Last I wrote I was looking for a counter trend rally up to the declining 30 Week Moving Average and/or the 200 day Moving Average. As you can see from the Weekly chart posted above, this has happened. The bounce today keeps the uptrend in tact so all is bullish but the structure is now coming into focus to give us signals IF the bear market wants to return. This is not a call for a bearish move, just pointing out the structure I am watching if the transition back into a bearish market comes to pass.
Chart above is a 2 year daily chart. This uptrend appears to be forming a bearish wedge, slightly cone shaped support and resistance running counter to the longer term trend. A break below the bottom support line would signal a resumption of the longer term trend. You can see there is room in there for the SPX to make it up to the 200 day. With the bounce today it looks like a battle for that area may be forthcoming. I made a prediction at the meeting last Thursday we would bounce off the support line of the wedge, move back close to or above the last high, just enough to get everyone bullish, and that would be the peak before the next harrowing leg of the bear market started. We'll see about that, but now it is in print.
This is a closer view of the wedge. Ooooo... ahhhh. Thought I had something to say here when I put this picture in there. Guess not.
Here is the chart without the lines of the wedge and only with the 30/50/200 SMA's. If this uptrend breaks, the structure aside from the wedge for managing the downturn will be the C pattern short play. The bounce today set up another higher low that will match up roughly with the 30 day MA.
Entries on the C pattern short according to my rules
1. Break of the last higher low
2. Break of the 30 day
3. Break of the 50 day
As each of these break I would be getting more short. There is enough room between the 30 day and the 50 day that a play can be had between them. We could still just break down to the 50 day and hang there for a while or find support and put in a real long term bottom. We would probably see more successful C pattern shorts in the market before this actually happened in the SPX. Still some development left to go but it is there if it wants it.
So... the bull rally is still moving on, but the market has been kind enough to provide us with structure to watch in the event that this rally exhausts itself. Another bullish development today was the $NDX bouncing off the 200 day rather strongly. That will be a good marker to watch as well if it ends up breaking in the future and that break corresponds to a C pattern trigger in the $SPX. But, to say again, until any of these things happen... DJIA 20k baby!! Wooohoo!! haha.
