They are bouncing the market this morning but the projected open keeps SPX below the (green dotted) daily EMA 20 and also the former blue sky breakout point at the February high. Logically, the 50 day SMA is acting as support this morning.
Even a routine and healthy correction could pull SPX back to the 38% Fib and/or the (black) SMA 200 in the 3050 to 3100 range. The drive to and through our target of 3500 was reversed decisively after the final holdout, the DJIA, filled its February crash gap. We had been noting each week in NFTRH that maybe the Dow was the last man standing in the way of a correction. From yesterday’s report:
Dow filled the February crash gap, and it actually gapped up on that day to do it. That seems like a final tick of excess that had the express mission to get the job done. It’s almost as if the machines were programmed for that damn gap and sure enough, they filled it. Then? An abrupt downturn.
Back to SPX, while it is probably best not to obsess on them quite yet, there are some concerning gaps way down low that we’ve been aware of the whole while in managing the wonder rally out of the March lows.
The weekly chart shows a negative RSI divergence to the recent high in price that is similar to the one that preceded the 2018 correction. There is a conspicuous weekly gap in the 3200s and a notable support shelf around the daily chart’s SMA 200 and 38% Fib. Above that is a smaller shelf at 3200.
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