We formed some possible reversal signals in the broad market today. The DJIA and SPX both formed hammers while the COMP formed a bullish piercing pattern. Both the DJIA and SPX bounced off their 50-day MA and the COMP bounced off it's 20-day MA. In addition, these bounces keep the uptrends in tact. Keep in mind that they all have the 20, 30 & 50-day MA's right below their 50% retracement level.
There is nothing new except that we are close to bursting out either up or down. I am guessing that some movement will occur ahead of Tuesday's 8:30AM GDP report. The consensus is -0.5% with a range of -0.8 to -0.5. The previous reading was -0.5%. I don't know how the consensus could remain the same as Q3, but whatever, everyone expects negative growth.
Yesterday was definitely a corrective day as evidence by the rounding cup in the morning. And then, after failing the near 920 level, the SPX dropped like 12 points and is now in a holding pattern. Technically, that's an intraday breakdown, however, if you look at a multi-day chart, it's a blip. We're back in the neutral range that formed since last Monday. Take a look at the 10-day chart.
A technical reason for the major whipsaw is because the market is bound by the 20-day, 30-day, and 50-day key short-term and intermediate-term moving averages. These, along with heavily-established support and resistance areas, are keeping the market in trading hell. Today, we opened at the 30-day, bounced off the 20-day + support since the Nov low. Your day was better spent going fishing.
Bulls need to breakout of 910 SPX at the 50-day MA (even a close sightly below is considered 'ok'). Bears need to break below 850 and close around 840 or less. This will complete the bear flag and 'officially' break the ascending wedge. In the meantime, we're still hanging out in this zone of nowhere.
The most likely scenario is that we breakout above 920 SPX within 1-2 days. The other scenario is that the flag fails and we breakdown, starting a perpetual multi-day sell-off which I will gladly participate in. The former holds the highest probability, by far. Tomorrow, expect 905 SPX resistance per the 3-day chart. The 50-day MA remains as the largest point of resistance to a breakout.