If there is indicator that is flashing bullish on the S&P 500 (SPX) chart, it’s the McClellan Oscillator which measures market breadth. Generally speaking when the oscillator gets up to 150 level, it signals heavy buying pressure where sustainable rallies are probable. But there are times where plus 150 readings are also categorized as an “all-in” final thrust higher and signals a correction. That interpretation can be applied to the reading in August where the McClellan Oscillator was at a peak and TD indicators were at price exhaustion levels. But the recent situation last week is different as the +150 readings come off downside TD price exhaustion levels. In the SPX updates below, note the TD Price Flip levels on the weekly and monthly timeframes for the SPX this week. They are all clustered together between 1960 and 1970. Current prognostication is for the market to test the lows but if the weekly SPX turns neutral, market direction will require a rethink.
S&P 500 (SPX) SHORT TERM OUTLOOK: NEUTRAL
Bearish if SPX closes below 1950.35.
Equities have rallied sharp enough to place doubt on the bearish picture. Therefore, although the 2 hour SPX is nearing upside price exhaustion and the 4 hour SPX trading just underneath the TDST Resistance, it will be difficult to tell if the next selloff will be just a sharp as the run up.
S&P 500 (SPX) SHORT/INTERMEDIATE TERM OUTLOOK: NEUTRAL
Bearish if SPX closes below 1941.28, Nasdaq closes below 4419.48 and the RUT closes below 1112.85.
On the daily charts, it’s shaping up to look like trading ranges will dominate. Look to see if the Russell 2000 (RUT) can lead, as it is on an unperfected TD Sell Setup. If ‘perfected’ with a higher high, and subsequently price flips bearish, the remaining indices are likely to turn lower with the RUT.
S&P 500 (SPX) INTERMEDIATE/LONG TERM OUTLOOK: BEARISH
Neutral if SPX closes above 1967.90 on October 31, 2014.
Despite the strong finish to the week, all the weekly indices are on TD Buy Setups. If any of the indices price flips bullish this week, this will provide additional evidence that markets will remain choppy.
S&P 500 (SPX) LONG TERM OUTLOOK: BULLISH
Neutral if SPX closes below 1960.23 on October 31, 2014.