Hiya Folks
Detailed Spi analysis from ze blog
==========================
A quick review of recent action on the SPI
Monthly:
This timespan being so slow makes for some difficulties for week to week analysis.
The "mini Crash" that occurred on the 6th of may, since attributed to system failure rather than "real" price action has created a long tail on the current monthly candle which makes for some difficulty in clear analysis.
From my perspective, and mentioned in previous posts there are a couple of things that I can bring to this chart which suggests to me further downside in coming months before we reach new highs.
The first "thing" is my beleif that we needed to test the 21 moving average on price as a minimum before resumptionn of upside.
The "mini Crash" did that.
The second thing, and this is esoteric Winkinatcha stuff, is that on lower timespans, regarding price action in relation to the 21 period MA, is that "generally" the first attempt to break and hold above the 21 MA in a downtrend fails, and it is the second attempt that is the start of a true up trend.
When one considers the entire Monthly down move, from October 2007, the last 8 months can be seen to be the FIRST attempt to hold above the 21 period moving average on this timespan.
Also the marked conjucture EW based wave count suggests that we still have a fifth wave down to complete.
The MACD signal line as marked by the blue arrrow is apparently rolling over.
The STOCHASTICS are now at an interesting level with the fast line just touching the "ver bought" boundary. On lower timespans theis CAN se a bounce.
Weekly
Ahh the good old Weekly, easy to analyse, hard (for me) to trade. Okay first point, the now commonly mentioned (by me) three peaked divergent MACD signal and the efficacy of going short on the third MACD cross of same.
First observed on the daily (will show it again Daily section) this pattern is so far "conforming" to the conjectured play, that is, the 3rd MACD Crossover heralds a potentially strong downturn. In this case we also got the added bonus of the "mini crash" anomoly, and that anomoly took price all the way down to the nearest strong support at the 4100 level, a level I have been banging on about for maybe a year now.
This creates the odd scenario of having price "satisfy" a technical level, though the speed at which it did made it practically impossible to trade, and I must state that I don't know if this satisfaction means all the downside is now "factored in". I am tempted to dismiss what I see as an untradable spike down asirrelevant to future price movements... this may not be a correct analysis technique.
Trendline on Price
Note the slightly Jagged trendline on price (thin blue) with two historical hits. ignoring the mini crash anomoly, the upcoming level may well provide some resistance.
MACD
Highlighted by the red arrow, we can see the signal line is as near as dammit to the zero line. This could well be a "bounce point" as on lower timespans bounces have occurred whne the signal line gets to this level. More on that in the daily section.
Stochastic
I note that the fast signal line has now broken through the 50% mark (red dotted horizontal) and this suggests to me that a continuation of this oscillator signal down to below the oversold level of 20 is now a high possibility. To temper this, note the current slope of the fast line is ever so slightly less steep. My "concern" here for further downside based on the stochs and the MACD signals is that in the two fine examples on the daily of this MACD pattern, downside was NOT complete until the stochastics were well into the oversold area.
Daily
Okay, First off, the Pattern examples as discussed in the weekly section. The similar patterns on the MACD are ellipsed in Red.
The vertical Light green lines on price signify where the third signal cross over occurred.
The red rectangles on the stochastics demonstrate that downside was not complete until the stochastic signal line was into the "oversold" region.
Note in both cases where the stochastic entered the oversold region, very slight divergence (higher lows on stochastic signal line to lower lows on price) both times pre-empted completion and price reversal to the upside.
I'd like to sraw your attention to the first, leftmost example of this pattern and specifically the MACD's initial rejection of the zero line and subsequant bounce on price.. referring back to the weeekly, we are just about at this point now, so a possible bounce would not surprise.
Okay onto more recent price action on this timespan.
First on price and not highlighted on the chart, A gap was created on the 7th of may, between the first and second green bars after the minicrash.
This gap has now been filled after overnight action.
In the Very Short Term, observations of gaps on other instruments oft sees a bounce or reversal of price after gap closure.
Not the marked Lower High? the age old definition of a down trend... lower highs and lower lows suggests to me that we are so far conforming to a downtrend and halfway through a definition with lower high in place.
The downsloping thin trendline is still calling price I beleive.
MACD
Note the arrow highlighting the latest histogram cluster. The last histogram BAR, shows a marked greater length than the previous. Despite potential of bounce from here mentioned, this larger bar has me concerned as observed on lower timespans it does not bode well short term and could signify further drops.
Downside Targetting.
Using extreme histograms at the start of divergence to price, on this timespan we have a conservative target of 4060 odd and a more radical target of 3650 odd. The minicrash could be said to have satisfied the conservative target to the downside, though "downtrend definition" above and higher timespan postulations suggest to me that this target may well be hit again.
Stochastic
The stochastic fast line has rolled over and is coming down to test the 50 percent line. how this indicator reacts at this level will be significant.
Hourly
On this timespan the gap as created on the 10th of may is marked with its lower level by the horizontal dotted red line on price.
Overnight action has caused this gap to be filled, clearing an obvious downside target.
As mentioned proviously gap fills MAY tresult in an immediat initial rejection of the level, so potential for bounce soon is valid.
on the MACD I have marked out a wave count, which suggests to me that we are in the fifth wave of a 5 wave MOMENTUM count.
Two interesting things that I wish to note here highlighted first by the red ellipse, where a staggered upwards slope on the MACD signal line resulted in a "failure" to acheive a cross over of the zero line as marked by the red arrow. Past ovbservance of MACD moving average movements have shown me that such a pattern is "weak" compared with a stronger macd indication of a potential reversal of price trend due to divergence where the gap betwixt signal line and slow is markedly large after the first "hit". The second hit so soon after the first gave an indication that the third hit could well result in a failure/ crossover as happened in this case.
As highlighted by the purple arrow, Currently the level of the MACD signal line shows a higher level than previous low on price, so possible divergence is creeping in. Crossover "required" first for confirmation though.
Conclusion
All in all I beleive the weight towards price being in a downtrend on the daily and yet to complet pattern fulfillment on the weekly suggests to me that further downside is to come.
We are at a possible short term bounce level, and a day or two of up is possible, but requires confirmation.
I do note also however that for the first time in the last few trading days, the spx 500 and Dow index futures, in thier "hour of power" pre/post market close dropped, and this is a potential sign that the buyers have "given up" and thus a daily reversal could occure in their next session.
I await today's intraday and closing action on the SPI to "get a clue"
Safe trading all
;)
(20min delay)