All I know is that $SPX lost 10.56 pts and 0.75% in May and that in the last two weeks it is down nearly 50pts and about 3.6%. We’ve been mired in a huge sideways consolidation pattern for nearly three months that has lately shown a darker side. The daily charts are screaming “avoid” and now the weekly charts are starting to show signs of stress.
In the daily time frame, the markets were moving within the confines of what could have been a new rising price channel that formed starting with the April 10th sell-off. On May 4th we broke down out of that price channel confirming that it was a Bear Flag pattern. Bear Flag patterns appear in down trends.
The 60min chart of SPY below shows that SPY was not able to stay above the rising trend line that was formed mid-week. The Stochastic is in the process of tracing out an M pattern. To complete the pattern, SPY will need to drop even further before it can rebound. But that’s only part of the story. The rest of the story is on the next chart.
On this 60min chart I’ve traced out a sideways channel within which SPY moved most of last week. SPY is most likely going to break out of this pattern early next week, but the problem is that the first break may be a false break. Still, this channel needs to be watched for clues. Also note on the chart that the green 13EMA remains above the red 34EMA and that both of these key EMA’s are rolling over. Further, this chart says ‘avoid’ for both longs and shorts and this won’t change until SPY breaks decisively one way or the other, IMHO, of course.
We’ve been in an extended period of market uncertainty going back nearly three months. This is likely to continue for some time and in times such as these cash is king.
Be careful and good luck in the week ahead.