The sensitive SPX 60 min. chart is still doing its job and that job is indicating that something has happened that had not happened before on the bounce from the September retest of the lows to the ‘W’ pattern’s measured target of 2100 +/-. It will be interesting to see if the market can bounce soon to test the mini breakdown or begin to make the prospect of a correction more readily apparent.
The daily chart gives some perspective to what we are looking at. Think of the 60 minute as the ignition, but the daily would drive the bus to Correction City, if applicable. Support begins at 2060 with the SMA 200 just above it and a gap just below it. MACD is triggering down and RSI is moving below its 20 day moving average.
While nothing is conclusive, the best upside target while keeping a bear phase ‘bounce’ scenario alive was 2100. The market is now starting to turn down from that point. In an earlier discussion of ‘comps’ 1, 2 & 3 we noted that in all 3 situations (2000, 2008 and 2011) SPX took a fairly sharp downturn after the post breakdown bounce. The first two situations continued down into bear markets and the other recovered and the bull resumed.
If we get a correction here, I am initially looking for a drop and test of support in the 1980 to 2000 area. Then it will be up to such a test to decide what comes next for the market’s larger trend. SPX may bounce from the support noted around 2050-2060, but if that area fails to hold we will be managing 2000 as the next destination.
