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Early in the week, a roughly 24 point pullback was the brief outcome, when the market met the S&P 500 hourly trendline area shown in the previous update. This trendline was drawn using several closing highs in the past.
As alerted by Tuesday’s daily Shooting Star candlestick (bearish Pin bar) formation up against channel resistance, sellers came in and forced the market lower thereafter.
On the hourly chart, this turned out to be a smaller degree wave (iv) of v only. So the overall advance quickly resumed and prices once again climbed to new highs. Hourly prices are currently struggling to overcome a trendline drawn slightly higher, using several highs from the past.
So the wave v from the early January wave iv low is still active it seems. The advance has stretched out more than expected, with both hourly & daily RSI-2 once again reached an overbought extreme, as a result.
Because of this, another pullback is likely due and even short term weakness towards channel support is not ruled out, as the wave v termination can be near.
Any break of channel support (daily closing basis) would most likely confirm a completed wave v price structure. Even more so when/if the wave iv low gives in to bearish forces, in the coming week(s).
The daily NYSE Summation Index trend indicator once again helped in revealing the true trend, despite the Tuesday & Wednesday market retreat. It remained in bullish mode, which it has been since roughly mid December. When it turns bearish, this would be a stronger indication of a short term top in place.
As this updated Volatility – VIX daily chart shows, overall investor fear is on the rise, after it bottomed out at strong support, over a week ago. Important resistance is up around the 12 area, depending on when it’s reached.
The S&P 100 BPI (Bullish Percent Index) daily Sentiment chart
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The S&P 500 hourly chart shows a wave v underway from December’s wave iv low. It’s now facing hourly & daily channel resistance, with both hourly & daily RSI-2 at the same time getting very overbought.
This condition is also reflected in Volatility, as the VIX daily has once again reached important horizontal support and is likely heading higher next week. A higher volatility outlook means pressure on the stock market.
So a near term pullback could take the market lower from Monday on.
Also, weekly momentum barely reacted (still holding on to it’s bearish mode) despite the strong advance towards weekly channel resistance this week.
This weekly bearish divergence in momentum could mean the Impulse structure from the November low is coming to an end soon, with any break below the wave iv low as a stronger evidence of a trend change.