Home > News & Commentary > Short Term Trouble on the SPX? (SPY, SSO)

Short Term Trouble on the SPX? (SPY, SSO)

To  add some color to my co-contributors post about intermediate term trouble for the market, I thought I would add my two cents about some ugly things I have seen on the S&P 500 chart (represented by SPX).

Here, we see the chart for the last year, using daily intervals.

What we can see here is that until now, this move up has been a normal, albeit fast, rally.  We have had a series of higher highs with higher lows following those highs within 2 weeks, almost like clockwork.  What we are seeing now looks different, because the market has risen to a higher high, but the wave pattern has become far smaller.  What I believe is causing this short-term stall is a combination of things.  Mike has covered the fundamental reasons, all of which I believe are valid, but here are the technicals.

This Fibonacci extension was drawn over the previous wave; the headfake as the market dipped below the 120 DEMA but then stalled and rose back up to where we are now.  This chart shows clearly that we are having more upside resistance than we previously have had at the highs, and it is localized around the 100% Fib extension line.  The market has tried three times over the past 2 weeks to break through the 1112.83 line, and has bounced down every time.  I believe this proves the final capitulation of the bears, as they let the bulls take control, but the bulls cannot muster the legs to take the market higher.  This will embolden the bears, and we could see some downside in the near future.

Of course, if the market breaks above the line, all this is meaningless and we will have to reevaluate.  Happy Thanksgiving!


Disclosure: Long the market in general


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