Thursday, June 8, 2017

Expanding Triangle or Diagonal Top Appearing on SPY - Probable Move Down to 232-235 in Coming Few Weeks

Click on Chart to Enlarge

Currently stocks have been moving higher but with notable weekly time frame bearish divergence in MACD on the SPY etf as well as bearish divergence in the breadth.  So fewer stocks are hitting new highs or advancing relative to previous price peaks.

This is classic type technical signals of a topping of a leg up in prices.

I had noted some recent scans which suggested a likely higher downside risk to upside potential.  However, we have seen mostly upside since then.  Though with the low volatility it has not been a big advance in percentage terms.

The 60 min chart of SPY is now again at a point of notable bearish divergence, and so if a multi week top is to form, it could do so here over the next day or so.

On the chart above I have put a pattern labeling scheme.  I put this here because the pattern in play appears to fit the back tests of price and sentiment studies suggesting downside risk over the coming weeks or couple months.  And clear price patterns can give some refined targets or expectations that may help a trader manage the trade more effectively than a purely mechanical or statistical method.

If this move is a "terminal" move then the implication is for a rapid move back to the starting point of the pattern around 232 on SPY.

If this move is a "B" move then it may be a less explosive downwards move back to the 232-235 area as support, but not necessarily back to the 232 level.

From my perspective of observing market price action relevant to price patterns and key support areas, if prices do correct and move below the 232 level, I think that would likely be a temporary climax point where stops would be run under support, and then prices would begin a rebound of some extent.


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