Comprehensive Look at the SPX

Let's start with the monthly. The first and foremost thing that stands out here is CANDLE COUNT. If we end up with a Red Candle this month that makes 5 consecutive Red... that is a very bearish signal in any time frame but particularly bad on a monthly basis because it is going to take 5 months of UP to reverse it. I have drawn some trend lines which point to an August low in the 1100s. Of course this all can change, but that's where we are today...

Now let's look at the weekly SPX... The Weekly candle count trend is still positive here, last signal was in October... 5 green. As you can see we had a chance to turn this signal down at the January lows and it held. If next week is another down week, that will give us a weekly 5 red count... I have highlighted next week to understand the possible range within the channel I have outlined. What this says is that over 1363 we have a possible trend reversal and channel break. The bearish possibilities are a low of 1240. I drew the channel lines on these charts a few weeks back but we are holding inside them nicely...

Edited by SemiBizz, 14 March 2008 - 09:23 PM.

Now let's look at the daily. This is indeed a mixed picture, but we can pretty easily define what the SPX needs to do in order verify a positive or negative move from here... Now the first thing of course is we still have a "6 Red" candle trend signal from January. That gives us a reason to suspect the trend can continue down. The next thing to look at is the retest of the January lows. Now on the one hand we had lighter volume this time and that is a bullish spring signal... HOWEVER, instead of a "V" bounce off the low that we got in January, this time we got a SIDEWAYS move off the low... that is an indication of "BUILDING CAUSE". Our first clue that we could break out of this to the upside would be a breakout over the channel line I have drawn here at 1322 on Monday. Now since we made the January lows there have been 5 daily lows in the 1320-24 range... so it is an important structure. We need to close over that level to prove the SPX can go higher. Now if we get the daily over, then we look to the 1363 level on the weekly as the next important layer of resistance. Of course along the way we have 1330, 1334, 1339 etc to overcome to get to that weekly channel resistance. So it's pretty well defined here. If SPX can climb and maintain 1322, which seems like a pretty modest goal early next week, that's going to be one piece of reversal evidence. If we break under that 1270 January low on any volume it is TROUBLE.

Good stuff, thanks.

Semi: I Can't tell from your chart on the daily, but WHEN we break through the 1270 Jan SPX low-where will the next volume test be? Thanks, Spooky

Just an observation. The current red candle count looks very similar to the candle count right before the beginning of the 2003 BULL. To me - that stands out more than any other candle pattern.