Upside momentum waning (update 10:53EST)

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.

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