Tag Archives: channel

Upside momentum waning (update 10:53EST)

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SPX has broken sideways out of its channel. If it now chops around up here and fails to move on to new highs (by more than a couple of points), we’ll have a nice set-up for a short position, just like the action in January:

Prophet.net

Even if stocks oblige with a nice drop, we can’t be sure that it will be the start of something big unless we see strong downside volume and impulsive waves.

UPDATE:

Very nice impulsive decline. Don’t count on it holding though — we might just ramp late this afternoon or early tomorrow if January is any indication. But this is looking good so far – if we do test the highs, it will be a sweet entry for a short with a tight stop (as is, I’m pretty short already, but would get more so at 1110).

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There is decent support at this morning’s low at 1095, but if we break it we could head right to 1080-1085, where there is better support. I suspect that break of 1095 would call into question the January analogue and suggest something more immediately bearish. Counting the waves on the 2-min chart, we could use a 5th wave and new low here.

Dow update: one more low ahead?

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We’ve gone sideways for long enough now to reset things for a new low, should the markets choose (futures made a new low overnight, by the way). The channel has been violated, but these things are not sacrosanct. Waning upside momentum around the 10,250 level suggests we could be setting up for another decline.

Source: Prophet.net

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Here’s a close-up of today’s move, showing a contracting triangle that indicated stocks were going to break upwards, since the move out of a triangle is usually in the direction of the existing trend. Such triangles often precede the last move in a sequence, so I’m looking for exhaustion here.

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Of course, if stocks accelerate upwards from right here, all bets are off.