The Trend is your Friend until that Nasty Bend at the End

19 ene 2022

Some bearish signs have been spotted in the Daily timeframe [D], which make me think we're at a negative momentum divergence and some provisions have to be taken in case this makes a correction. So far The market has been in a solid uptrend with some trend testing and dip buying. This has been repeated since the major downtrend we had in march 2020 when the pandemics, the surge in unemployment the slow down in energy and other indicators signaled a very sour bear market. We have had just a couple of major corrections since then and it makes sense to have another one to "buy cheap". This market, as long as the interest rates are low and the flow of money keep on fueling it there's no reason to think this will go to a bear market, just minor and major corrections.

SPX on the Weekly Time Frame [W]

Trend [W]: Up, up and away. The Ribbons keep on the green and except for a spotted weakness in the fire map, which is interpreted as a weakening momentum this is officially in Bull territory.

Momentum[W] : Since November last year this showed weakness, it has been pointing down, which means that the last All Time High was in a negative momentum divergence already.

Volume Imbalance[W] : After the last correction on October 2021 it was all in the Bull side, until November, where the Bears started to step in and they have been taking it down. That's the reason why the upside momentum stalled and it took the trend back to its lower support channel line.

Directional Vector[W] : The directional vector points down, it showed a sign of weakness and breached the zero line to the bear side. It signals the start of a correction. As long as this remains there and recovers, it's just a minor correction. Depending on how deep in the Fibonacci retracement goes, it will be labeled as minor or major correction.

Bull/Bear Tug War [W] : The Bears are in control, they stepped in on November 2021, and they have been increasing their presence. The Bulls are trying to buy this dip, as usual, but so far the Bears have not release their claw on the market.


SPX on the Daily Time Frame [D]

Trend [D]: This trend was breached yesterday and today it is going down, it is aiming at the 0.5 Fib Support line, referred to the bottom it made on October last year. Depending on how far the bears want to take this down, it may go to the 0.382, 0.236 or even make a double bottom, which is still good for a deep dip buying. Below this level the Bears are in control and it would become a Bear Market.

Momentum [D] : Negative and going down.
Volume Imbalance [D] : It went to a deep sell level, it stopped the selling but the buying level is not enough to bring it completely back to the bull side, it is showing just a small head and going back down.

Directional Vector [D]: Down and down. No signs of bull direction.

Bull/Bear Tug War [D]: Bears are in control.

Conclusion: In the Weekly we see a Bull market with the main trend intact, but with a weakening momentum, this signals a correction, how far, it depends on how much volume the bears are willing to commit. In the Daily it doesn't look good, officially it has already breached the trend and it is testing the support levels at 4545, 4484, 4404 and 4282.

My position here is Bearish for the correction and getting ready to buy the dip once it shows signs of reversal, else keep on selling assuming a strong correction.

"Everything you need to know is right in front of you"

~ Jesse Livermore