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SPX 500: Daily and Monthly Chart Differentials

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SPX 500:  Daily and Monthly Chart Differentials

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The daily chart of the SPX 500 is rolling over hard, and when there is panic in the air (VIX at 38, put/calls rising) there is often an overshoot of targets. If you had your eyes on the 200 ma (3130), you might look a bit lower to around 3080 or so for a significant bounce. 

We might get a big capitulation there, but that's just a guess at this point. 3200 would be an area to look for if the markets get deeply oversold, for a bounce that is.  Many will step up to buy that 200 ma test, but frankly it'll be too early for me. 

MACD has rolled over here, and the RSI is poor, the intensity of the drop in that indicator is seen by the steepness of that curve downward. The cloud is red now and the money flow bearish. Time to be cautious, have lots of cash and some protection working at all times. 

A more ominous sign on the daily chart is the traced out M pattern.  This is bearish as anything out there, with a massive double top and a breakdown from support.  Volume trends are elevated here, and while we are likely to see buyers eventually step up, we wonder just how strong that bounce might be.  It'll take several weeks even months to repair the damage of the last few weeks. 

The monthly chart is timely here as today is the last trading day of October. This is still bullish until the MACD rolls over. Money flow is super strong since 2009, and this may just be a minor blip on the screen. 200 month MA strong along with the 100 and 50, the 20 month comes in at 3050. No reason to be bearish on the long term based on this chart.

Bottom line, while there is some short term turbulence we keep in mind the long term trend is still bullish, until further notice.  As is often the case lately, play it light and be ready for opportunities holding plenty of cash.  

The preceding article is from one of our external contributors. It does not represent the opinion of Benzinga and has not been edited.

 

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