SPX And SSO

This is the 34/55/89 RSI chart of the SPX. When any two RSIs in the Fibonacci Sequence of 8...13...21...34...55...89...144...233 have readings the are ver-r-ry close, I call that "synchronicity." If the faster RSI is above the next RSI in the sequence, it's "Bullish Synchronicity." If the faster RSI is below the next RSI in the sequence, it's "Bearish Synchronicity."

In this chart, all of the cases a synchronicity are bearish. The trigger for a signal, in these bearish cases, is if the stock prints a penny below the prior day's session, and also closes lower. If it closes higher, the signal is very suspect.

I put this chart first, without benefit of seeing the SPX price chart, because indicators can't "see" the price chart either. They only do what they do best: they "indicate." They don't TELL US to do anything. We must decide if we want to act on what any particular indicator is "indicating."

We can see from this chart that, on August 31, the 34/55 RSIs went into Bearish Synchronicity, with readings that were very tight, and with the faster 34 RSI positoned below the slower 55 RSI. That meant that a print the next session of 1209.34, a penny below the August 31 session low of 1209.35, would be a sell from this particular indicator.

I stress that because indicators are just one clue as we collect our Body Of Evidence. They need to be viewed in context with what the price chart is doing, so let's look at the SPX chart.



The 34/55 RSI "Sell Signal" at 1209.34 was issued the session after a "possible" Data Point #4 of a Bear Flag, when the 34/55 RSIs were at Bearish Synchronicity. Again, that's just one clue. What we'd look for next is a break of the bottom of the putative Bear Flag, then some sort of retest of the 1101.54 low after that.

There are some additional notes on the chart. Notice, in particular, what happened after the SPX was down seven days in a row. A stock or index going up or down for any number of consecutive days in a row is not a reason to buy or sell, unless anyone is fond of Russian Roulette ;)



These Bear Flags/Rising Channels can be tricky. They can ratchet their way higher and wear one out. In the SSO, for example, we've got a gap just overhead from Friday's Gap Down opening that they might try to fill early next week.

As these price charts stand, though, it's Advantage: The Bears