| | | Great post Davy.
I posted a few comments about the SPX on another thread.
I will summarize the posts for this thread.
As of now, we are getting a washout (I picked this term up from Humble1) in the SPX, similar to the slides in January, April and August 2014.
However, we need to keep in mind that nasty corrections initially start out as washouts.
I consider the October swoon (-9.9%) to be a correction, as it was much more severe than the common washout (4 - 7%).
2014 Washouts: Top Tick - Bottom Tick
January 2014. 1850.84 - 1737.92 (112.92 points, 6.10%, 14 days)
April 2014...... 1897.28 - 1814.36 (82.92 points, 4.37%, 6 days)
August 2014... 1991.39 - 1904.78 (86.61 points, 4.34%, 10 days)
Dec 2014 (so far) 2079.46 - 2002.33 (77.1 points, 3.71%, 5 days)
On the daily chart, I look at where price is relative to a band of exponential moving averages (30 through 60).
Wednesday and Thursday, the cash SPX closed within that band (after trading above the band from Oct 27 to Dec 8).
Friday, the index ploughed right through the lower end (2014).
This usually indicates a sloppy market with a downside bias over the following 3 to 5 trading sessions.
I expect the market to mount some sort of rally on Monday or Tuesday, but a washout bottom is probably at least a few days away.
My weekly model needs a close below 1937 to indicate that a bear market may be in progress.
In October, my weekly model would have turned decidedly bearish on a close below 1885.
However, the lowest weekly close in October was just a hair below 1887 on October 17.
Closing at a 7 week low, the bearish engulfing candle on the weekly chart is real ugly.
The 200 day moving average (plus or minus 1%), and currently at 1945, may be a good candidate for the washout bottom. |
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