SPX: Barbarian At The Gate

From the May 26 close in the SPX:

"Since yesterday was such a strong day, I'd like to see some give back, then a breakout, but I don't get to call the market ;)"

We got one day of give back, then The Bulls came on again and stuck Friday's close right at the top of the Symmetrical Triangle, champing at the bit for a technical breakout above the top of the pattern, which comes in today, June 1, at SPX 919.727. The Bulls have executed very well during this pattern, fending off three attempts by The Bears to take this index down below the SPX 875-877 neckline of the Bullish Inverse H&S pattern while at the same time, consolidating the big gains off the March low.

As we've said during this pattern formation, "It's bullish until it ain't." It's still bullish, as the chart stands.

The 200 Day Moving average, as of Friday's close, is at SPX 928.605. The 50 Day Moving average is below, at SPX 861.781, so they're "inverted," or "bearishly positoned." Much is made of the 50/200DMAs, but after years of observation, I haven't found anything about Bullish and Bearish Crosses to hang our hats on. For example, I've seen TOPS in stocks occur within days of a BULLISH Cross in the 50/200 DMAs, and BOTTOMS occur within days of a Bearish Cross in those moving averages.

Let's look at the SLV, as an example of how the 50/200DMAs behaved recently.

The 50DMA is the dotted green line; the 200DMA is the dotted red line.

When the SLV arrived at the 200DMA in February, it got there off a rally that was nearly parabolic. Straight up. And, the pattern targets in the $12's had gotten MADE. The SLV temporized at the 200DMA for a few days, and while it's tempting to short a stock in which the 50/200DMAs are so badly position (the 50 well below the 200), the SLV had about 7% more in it to the upside, and the shorts got squeezed. UGH.

After the selloff to Black Data Point #2, the SLV rallied, then sold off a bit while the 50/200DMAs made a Bullish Cross in the high $12's, in late March. Bulls who got long the Bullish Cross got whipsawed. The SLV sold off about 9%. Not particularly useful. UGH.

Where I think the 50/200DMAs were useful, was coming off the 11.64 low, at Black Data Point #4. The SLV rallied to the top of triangle, and failed at there, and also failed at the 50DMA. DOUBLE resistance. But, the 50/200DMAs now were properly positioned, with the 50 above the 200.

The selloff from validated resistance (the red arrow) ended at 200 DMA support, and with the 50/200 DMAs properly positioned with the 50 above the 200, it was GOOD TO GO!! Ms. Market then told us:

1. I'm taking out the Buy Pivot high to the UPSIDE
2. I'm breaking out of the pattern to the UPSIDE, and, importantly,
3. I'm taking out validated resistance (red arrow) to the UPSIDE

Go...Go...Go...and, GO!

I shouldn't have used this chart as an example since we were a day late looking at it back at the May 4 breakout. Curses! LOL.

In summary, I personally don't use any moves above or below moving averages, or Bullish or Bearish Crosses of moving averages as a Buy or Sell signal, but rather, I use them as pieces of the "Body Of Evidence" in making a decision based on how they are acting in context with the entire chart, as in the "pinball" example in the SLV.

Downturn off resistance at the 50DMA. Boing! Upturn off support at the 200DMA. Boing! Rally ABOVE the 50DMA.

Boing! Boing! Boing! ===Lights Flashing=== Boing! Boing! Boing!!!! LOL.