Option Investor
Printer friendly version
Pivot table:
[Image 1]

I showed the setup for AAPL yesterday for what I thought would be a down day on Tuesday. And if AAPL was going to be turning back down I was betting the broader market would as well. Both AAPL and the broader market did in fact turn back down. SPX broke its uptrend line from March 6th through the March 30th low this afternoon, bounced back up for a retest (kiss goodbye) and fell away into the close. It dropped to the slightly lower uptrend line through its April 1st low, near 815 by the end of the day. That slightly lower uptrend line is the line in the sand for the bulls to hold now. If that uptrend line breaks then it will be pointing to at least a stronger decline to the 770 area.

SPX 60-min chart:
[Image 2]

What's not at all clear yet, and probably won't be for at least another week, if not until after opex, is whether or not the reversal from last week's high is the start of a more significant decline. The reversal was at the downtrend line from November which could be the top of a large descending wedge shown in bold lines on the daily chart. If it's the start of a larger decline it will take us to new lows below the March lows (probably in May) but we could get just a pullback that then leads to new highs for the current rally (shown in green). The daily chart is getting confusing with all of the trend lines and possible price scenarios but one that is an interesting possibility, if the market is able to press back up from here (and not break the uptrend line from March), is the pink one that calls for a push up to a Fib target near 870 and the top of a potential rising wedge pattern (this is the same as the dark green line on the 60-min chart above, pushing up to about 870 and the upper trend line). This rising wedge pattern would likely lead to a fast decline back down to new lows.

SPX daily chart:
[Image 3]

Note the break of the uptrend line on RSI. It almost always leads price in a break of its trend line. It doesn't mean SPX can't make a new minor high yet (while RSI makes a lower high for a bearish divergence), but this is the first heads up that the rally from March is over. Now we have to play it one leg at a time to see what develops next (a continuation lower or just a pullback before pressing higher again). Continue to play the market short term but move into protection mode if you're long the market.

Market Monitor Archives