Friday, February 21, 2014

All the major indices have recorded TD Sell Setups @9 yesterday, ahead of options expiration. While a simple reversal from here is the easy path, a more complex pattern is in the mix since breadth readings have been strong of late. 

Using the McClellan Oscillator as an example, the relationship between price and breadth are correlating as the oscillator goes into an extreme overbought condition. Since strength begets strength, an extreme overbought condition gives the nod to the bulls as demonstrated by the chart below. That’s the typical response. However, note the previous overbought condition last December where the S&P 500 traded in a tight range for the first part in January before giving up a 6% pullback.

A similar situation may be brewing where various degrees of choppiness begins to dominate. To reflect this conflicting situation, all the timeframes in the SPX outlook section, up to the monthly, are likely to line up neutral to finish the week. Image——————————————————————————————

S&P 500 (SPX) SHORT TERM OUTLOOK: NEUTRAL

Switch to bearish if SPX closes below 1828.71

ImageIt still makes sense to remain cautious. The nominal pullback was not convincing enough to claim a sustainable upside breakout. 

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S&P 500 (SPX) SHORT/INTERMEDIATE TERM OUTLOOK: NEUTRAL

Switch to bearish with a close below SPX 1828.71, the same as the Short Term Outlook. 

ImageImageImageImageAll major indices finished TD Sell Setups @9 and while options expiration may distort prices to produce a feeling of bullishness, the Setups need to be respected for a potential momentum trend down, which will be established if SPX closes below 1828.71. A new high close above SPX 1850 will require a reluctant reevaulation. Note the COMPQ’s Setup has not been ‘perfected’ yet. 

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S&P 500 (SPX) INTERMEDIATE/LONG TERM OUTLOOK: BEARISH

Switch to neutral if SPX weekly cannot record a close below 1790.29 (updated February 17th)

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S&P 500 (SPX) LONG TERM OUTLOOK: BULLISH

Flip to neutral if SPX (monthly) closes below 1756.54 (updated February 3rd.)

 

 

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