As better seen on the S&P 500 hourly chart, a Rising Wedge pattern is likely in it’s ending stages, with the high for the week coming closer to the +1/8th MML target (2562.5) mentioned in previous updates.
In Elliott Wave terms, this pattern is called an ‘Ending Diagonal’ and is bearish once it has reached it’s termination point. Any break below the lower wedge line would confirm a completed pattern.
A minimum downside potential should then be channel support, the level depends on when this support zone is reached. If it fails to hold, it could open up for even more weakness, short term.
This bearish stance is supported by a RSI divergence observed on the hourly chart and also daily Volatility once again falling to it’s long standing support area, early next week.
The S&P 100 BPI (Bullish Percent Index) daily Sentiment chart
The Neural Net System is Long on the S&P 100 weekly
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The S&P 500 is pushing higher on below average Volume, (partly short covering?) in what could be a wave c or 5 underway from the August low, Thursday’s high came up against short term channel resistance, 10 points from the + 1/8th MML area mentioned in the previous update.
With this in mind, a pullback is likely the next market event, with strong support (see daily chart) coming in from several trendlines it broke through earlier in the week. The lowest one also roughly represents channel support. So if this zone holds, the overall bullish trend could continue, ideally towards the 1/8th MML area at 2562, before the market is peaking, mid term.
If it fails to hold, it could mean the trend is changing right away, short & mid term.
The reasoning behind this view, is this week’s OEX close up against an even larger weekly trendline (coming up from 2015) and with weekly momentum at the same time in an overbought extreme and also with Volatility reversing higher from a long standing support zone.
Increased evidence of a mid term peaking market, would be a weekly Stochastic bearish crossover and the daily NYSE Summation Index trend indicator turning bearish. It has been in a firm uptrend since late August and despite some price noise on the way up, it has shown the true trend very well.
So once the market turns bearish, a natural first price target zone to look for would be trendline support, down around 1080 – 1100 for the OEX. Any clear weekly close below it, could open up for even more weakness, towards the next lower weekly trendline.