Monday, October 4, 2010

Close to a "sell" signal

With today's drop SPX moved very close to a "sell" signal according to EMA25 crossing EMA50  on hourly chart. The price moved bellow both EMA25 and EMA50 but it also got very close to the rising 5 days moving average (SMA120 on hourly chart). Even a small drop tomorrow will onset the sell signal. Even if market is going to move down from here I hope you enjoyed the nice ride from 1040 if you were lucky to buy exactly at the bottom or from 1080 when the EMAs did cross.

The negative divergence on MACD histogram I told you about more than week warned us about a potential reversal. Despite the fact SPX moved up from 1124 on September 23rd to 11156 MACD continued to move down after touching its peak on September 15. Right now MACD is also very close to give a "sell" signal.

On longer time frames market still looks bullish. We do have two solid higher lows (1020 and 1040) and two nice higher highs (1127 and 1148). The uptrend line is around 1065 on daily chart or around 1090 on weekly chart. Market may tank from here but if the uptrend line on daily chart is going to resist the pressure the ball is still going to be on bull's side. There are many other levels of potential support SMA200 (1117), June's high (1120), August high (1127), upper edge of the former trading range (1105) but my favorite level of support remains the uptrend line, around 1065 today and most likely 1070 by the time SPX is going to touch it. Also remember 1070 is the level where most of the volume occurred in the last 4-5 month, one more reason this may prove to be a good support level.

Meantime, if EMAs are going to cross tomorrow I am going to sell and go short.

All the best!


P.S. Thanks again to those of you who clicked on the ads

1 comment:

  1. Thanks for the timely update babaro! I find your system very valuable!


Thank you for your feed-back