So the poor kid can either climb back down and risk embarrassment or face his fear and jump. Right now the market has to either face its fear and jump(ie Go Higher) or climb back down the ladder and be embarrassed(market goes lower)
Since the market is in an uptrend and has support below it. Let's say the kid jumps, where does the market go.
The daily chart is making a ascending triangle with 950-955 being the top. A break of this would be bullish. The measured move would be to 978-980. If you make the flag pole from 900 to 950 its a 50 point move to 1000.
On the weekly there is a similar pattern which would take SPX to 976, but 2 points below at 974 is the 50 EMA weekly.
Other positives for the market is that it is above its 200EMA, 200MA and trending with its 20/50EMA. This quick move to these levels would be the final blow to any bears especially the new ones who were shorting at 950. Now that the kid jumped, he will keep on jumping. So if the market breaks out, it might have the confidence to keep on climbing.
But what if the market decides to walk down the ladder and have everyone laugh at it. Can this happen, this is the side I am leaning towards.
First looking at the 60 min chart we can see some topping action via resistance at the 950 level, this area has been strong resistance. Right now the 60 MIN SPX is trading in a channel that is trending up. While this looks bullish, the indicators are showing that the recent move up has had some weakness. The kid is getting scared! MACD had failed to make new highs during this move up and is showing bearish divergence, RSI has also been trending down as well.
The daily chart shows the resistance at 950 equal to the 60min. The market also has broken the green channel, falling through the bottom of the channel. It is also close to a longer-term trendline from March, which may provide some support. But note the lack of volume on this move up to the new highs(bearish, the kid is losing confidence as he walks up). In fact volume has slacked off since 900. Other bearish indicators are; the Stoch is overbought and turning down, MACD histogram is moving down, CCI has moved from +100 back down.
But the market unlike the kid on the diving board, has some internals we can read to see if it has the confidence to jump.
$BPSPX is at the same levels where the market dropped previously, so the kid walked to the ladder a couple of times with the same confidence but failed to jump.
$NYMO is still below zero and trending down, while the market has been trending up giving negative divergence.
$NYSI- has turned negative but will it turn up again like it did 2 weeks ago.
$NYAD has stalled and notice the ATR has been in a decline the past couple of days. If this trend continues $NYSI will keep moving down as well, since the numbers of advancers will not support the NYSI move up. But also look at the level where ATR is. It is very similar to last big market move down, $NYAD right those levels as well.
Looking at MEGA B, the Advancers and Advancing volume has been in a steady decline, while it is the opposite for Decliners, they have been moving up.
TRIN- is confirming this increase in decliners. TRIN has slowly been trending upwards since May, while the market has been moving up.
So will the kid jump. It's hard to tell, the internals are saying he won't do it since these indicators are looking bearish or showing divergence between the market and the indicator.
But if something gives the kid courage, like seeing little Suzie watching him(b.s economic news or Goldman bidding the market up). Then market could break out causing these indicators to head upwards.
But I am leaning towards the kid walking down the ladder, the indicators are showing he did the same thing before and walked down. I think SPX gets another possible push up to 950-960, then a move down to at least 920 to fill the gap. Then we will have to see if the kid goes crying home to his mommy(drops more) or stays at the pool and plays running bases(bounces back up).
So will the kid jump. It's hard to tell, the internals are saying he won't do it since these indicators are looking bearish or showing divergence between the market and the indicator.
But if something gives the kid courage, like seeing little Suzie watching him(b.s economic news or Goldman bidding the market up). Then market could break out causing these indicators to head upwards.
But I am leaning towards the kid walking down the ladder, the indicators are showing he did the same thing before and walked down. I think SPX gets another possible push up to 950-960, then a move down to at least 920 to fill the gap. Then we will have to see if the kid goes crying home to his mommy(drops more) or stays at the pool and plays running bases(bounces back up).
There is one other scenario that if it happens everyone will be amazed. Here it is:
