11-1 SPX View | Bulls on Wall Street

11-1 SPX View

Oh, the bulls were such the tease today..Just when you thought they were packing their bags and making room for the bears to roar, they came back in late trading to prove that there is still some fight left in them.  The SPX not only finished above SMA20, but it also managed to squeeze out a close above SMA10.

The argument for the bulls that we’ll continue to the upside:

  • It’s all about price and the price is still trending up.  Even though the directional movement (yellow box on chart) has been basically non-directional, today’s winner was clearly the bulls. Until +DI crosses below -DI, then I have to assume we’re still in an uptrend.

The argument for the bears that we’re about to have a tasty reversal:

  • SMA10 / SMA20 gap is starting to close.  SMA10 looks to be turning and losing gas.  A SMA10 cross below SMA20 is very bearish in the short term.
  • The narrow bollinger bands are getting pierced way too often to the upside (yellow arrows).  These are all failed breakouts from the current trend and the more often it fails to push open the bollinger bands, the more likely it is to reverse. Notice today’s high failed to break last week’s high. That’s a lower high.
  • Volume doesn’t indicate much.. maybe that we’re a little tired here
  • MACD has turned slightly bearish and a break below the trendline would support the bears.
  • Stochastic RSI14 is neutral.

Summary:

It appears that the market is in a holding pattern and circling the airport until QE2 and the elections have taken off and made room on the runway. There isn’t a significant edge to the SPX chart right now and I think it’s still a stock picker’s market – find the intraday momo plays and wear them out. It’s too early or too late, for that matter, to have a strong market conviction long or short.  Levels to watch:  SMA20 and  1196 (SPX high last week).

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