SPX - 875-877 Continued

After two rejections (the red arrows) at the bottom of the Bearish Wolfe Wave (trendline #2-#4), the SPX sold off a bit yesterday on "swine flu fears."

The MACD also turned down from below its signal line, so we've got a possible "Kiss of Death" signal. Remember that indicators don't know what the chart looks like, and that they aren't TELLING US what to do.

For example, when the MACD fell below its signal line (red arrow) on April 22, the SPX closed at 845. The next session, the SPX put in a low of 835 near the Bearish Wolfe Wave target line (#6), then rallied 36 points, to 871, on Friday, April 24. So, a cross below the signal line isn't an automatic sell, nor does it mean that we immediately are going straight down (and, we didn't).

Yesterday's rejection at/near the MACD signal line is another "piece of evidence," and in the price chart, we know that we have TWO rejections at the bottom of the Bearish Wolfe Wave (the two red arrows in the price chart above).

Although the neckline of this putative H&S Top in the MACD hasn't broken, the fact that it's rolling over is an indication from this particular indicator that "the Force isn't with the Bulls," and it suggests at least "some" short-term weakness. The Bulls would need to show some muscle to blast through SPX 875-877.

Here are two examples of how they could do it.


1. Sell off "some," to Blue Data Point #4, for a Bull Flag (a low that is slightly lower than the 826.83 of April 21, which is Blue Data Point #2). OR...

2. Sell off to a low that is higher than that, for a Symmetrical Triangle, then break out above SPX 875-877. A Symmetrical Triangle is "lower highs" and "higher lows." The trendlines converge (eventually meet up with each other).

The example shown in this chart is the Bull Flag scenario. Trendline #2-#4 would point UP for the Symmetrical Triangle scenario.

Remember, we're not predicting. We're observing, and trying to follow Ms. Market as best we can. We don't want to assume a bullish or a bearish resolution.



Yesterday, I mentioned that if we take out SPX 804, that would blow any chance of putting in a Right Shoulder of a Bullish Inverse H&S pattern because 804 would be the low of a Left Shoulder. A Right Shoulder low should be higher than the Left Shoulder Low.

I also mentioned that if we do take out SPX 804, we still could do something like put in an Ascending Triangle, an example of which I've drawn in this chart.

We would need to establish Black Data Point #4 "somewhere" below 804, connect Data Point #2 (the March low) to whatever low we would make at Data Point #4 to establish the ascending line, then go up and knock out SPX 875-877 for a bullish Ascending Triangle breakout.