In tonight’s blog, we conclude the S&P analysis.
Friday’s price action and volume have all the earmarks of a top. Figure 1 shows the price action from the Jan 6 high. You’ll notice that on Thursday we had a reversal bar with normal range (just) and normal volume. We also had a Neutral Day closing in the upper extreme (Figure 2). Neutral Day are possible reversal days i.e. I’d be looking for a move up.
On Thursday we had a higher high and higher low BUT..
- Market Delta shows that we had selling volume (Figure 3).
- The range and volume were below normal. Coupled with the higher high and higher low, this is usually bearish. Still Monday was a public holiday and that may have accounted for Friday’s lack of activity.
The failure to move higher with mean range and volume tonight - given the Neutral Day and Reversal Day on Thursday - would be bearish.
Today we shall probably see an open around 804 to 802. If so, this would be a further indication that February 13 marked a high. If we can accept below 797 basis March, we should challenge the November 8 2008 lows at 741.
The open-gap will allow us to enter the market using the ‘open-gap’ rule. My stops would be above 841 based on the 50% rule in a bear pattern (Figure 4). I’d be looking to exit the first third at around 751 (basis cash). I’d move my stop on the second third to break-even when I exit the first third; I’d leave the initial stop unchanged for the last third.
Tomorrow I’ll review tonight’s price action and answer Baz’s question on trendlines.
Figure 1 S&P 5-day Swing
Figure 2 Neutral Day
Figure 3 Market Delta Volume
Figure 4 Bearish Composite Profile