SPY Bounce Possibly Near an End - Projections for Further Decline - 8-25-17

Click on Chart to Enlarge

Currently the strongest portion of the expected rebound based upon recent studies is completing.  The recent volatility spike showed the strongest closing returns at 5 days after the signal.  The time has passed now over the last session or two.

So it is possible that price continues to advance, but the recent 5 day rebound has been relatively weak.  From both price and breadth measures, my take is that the recent rebound is still a counter trend move that is likely to fail and lead to new lows.

Based upon the price action coming down off the highs in SPY, where the "C" move was larger than the "A" move, it is quite possible that the next move down will be larger again than "C".  That would be an expanding pattern.

I have often found the speed line of the A-C points to be a useful approximation of where the next direction move down will find support.  So in this case if price breaks to new lows, I will keep that in mind if we see volatile action or a sizable gap down in the region of the speed line.

I have a green horizontal support/resistance line on the chart as well which has 3 past touch points on the chart, and so it would again be a target on a decline from current levels.  So basically a decline to 240-241 on SPY would be a very reasonable suggestion for a near term move.

That target would also also fit with the past study on put/call sell signals in July/Aug which showed 8 out of 9 had declines of 3% or more in the next 4 months.  SPY has yet to decline 3% from that signal origination in late July.

Lastly here, the VIX historically has an approximate 19-20 day cycle.  And based upon that it appears that the next VIX high could be roughly expected toward mid September or a little earlier.


Pete