SPX - 875-877

Review of our discussion about trendlines, from Monday, April 20:

"In the current time-frame, this still has the look of a Bearish Wolfe Wave. As I'm sure you've noticed, technicians often draw patterns and trendlines differently, which is their privilege. My view is "use what works." I would have used the high and low of the area that I've circled in blue, but it doesn't work. The trendlines go slicing through the candles that follow and I won't do that because, in my view, that renders any significance of the trendlines useless. If a bar opened or closed on a trendline, violated it slightly, then reversed, I would use it. Otherwise, I can't use "willy nilly" violations of trendlines. That's just my opinion, of course."

At that time, the SPX was at Data Point #5, at the top of the Bearish Wolfe Wave. Since then, the Wolfe Wave target got MADE, at Data Point #6, then the SPX reversed to the upside and chased the bottom of the pattern (Trendline #2 - #4). We've gotten two trendline validations, at the red arrows. Both were back tests of the bottom of the pattern, and on both occasions, the SPX backed off from the trendline, telling us, "Yes, that is resistance." Friday's retest came within eight cents of the trendline before the SPX eased off.



Since the high of SPX 875.63, at Data Point #5, the MACD has gone down below its signal line and on the rally back-testing the bottom of the Bearish Wolfe Wave, the MACD also has rallied to back test its signal line. That sets up a "Kiss of Death" failure in the MACD if it should turn down from here, and also sets up of "mini" H&S Top in the MACD.

Downside targets would be SPX 826.83, where the Bearish Wolfe Wave got MADE at Data Point #6, and SPX 814.84, which is the bottom of the Bearish Wolfe Wave, at Data Point #2.



Bigger picture, basis the Ichimoku Kinko Hyo chart (At A Glance...The Table Of Balance), the recent high at SPX 875.63 sets up a possible neckline (horizontal purple line) for a Bullish Inverse H&S pattern. The Left Shoulder would be the January-February Symmetrical Triangle (in purple), which I really should label an Ascending Triangle since the highs were so flat (875 and 877). The low of that possible Left Shoulder is 804.30, so for there to be a case for a Bullish Inverse H&S pattern, that low should NOT get taken out.

A few comments on this Ichimoku Kinko Hyo chart:

1. Notice that on the first rally off the November low, the SPX rallied through the Kumo (Cloud), represented by the vertical lines, and closed above it for just one day, on January 6. That rally formed a Bearish Rising Wedge (pattern in black), and when it broke on January 9, down she went.

2. Off the SPX 804.30 low in January, the rally ended at about the middle of the Kumo and when the Symmetrical Triangle/Ascending Triangle broke down on a Breakaway Gap on February 17, down she went again.

3. The initial thrust off the March low al-lmost got to the top of the Kumo (Cloud) then sold off, but it was different this time. Instead of going down below the Kumo (Cloud) on the selloff as it did on the last two rallies, the SPX held its ground inside the Kumo, then thrusted well above it on a big white candle, on April 2.

The first selloff from April 2 found support at the 8-day Tenken-sen (solid green line). The next selloff found support near the 21-day Kijun-sen (solid red line).

4. We can "See At A Glance...The Table Of Balance" that the SPX now is well above the Kumo, which is about 100 points below here, currently at SPX 770-772. Just as the Kumo acted as resistance and shut down the rallies off the November and January lows, it "should" act as support on any selloff to that level.

Summary: As mentioned, a selloff below SPX 804 would negate the Bullish Inverse H&S possibiltiy, but below that level, the SPX "could" do something like put in Data Point #4 of an Ascending Triangle.

Structurally, in my view, a selloff from this SPX 875 level to form some larger pattern would support a more sustainable rally on any future upside takeout of SPX 875-877. "The bigger the base...the better the breakout."

Just a few things that I'll be watching on a selloff, although I'm not assuming anything. I like the expression, "When we ASSUME, we make an ASS out of U and ME." LOL.