$SPX moving within confines of Bull Flag: 03/14/2014
On February 6th, 
SPX pushed back inside the rising price channel, which was at 1760, and then confirmed this was real on the following day. This put in place the possibility of a measured move of 120pts based on the width of the channel. At the time, I thought SPX would push to the upper channel line at around 1900, exceeding the 120pt target, but obviously that didn't happen.
NowSPX is moving within the confines of what appears to be a Bull Flag and rather than trying to catch a falling knife it is much safer for traders to wait for SPX to break out of the Bull Flag before initiating any new long positions, IMHO. I say this because there is always the chance that the current pattern may prove to be a falling price channel rather than a Bull Flag.
A couple of things to watch for in the week ahead: The RSI is now just above 50 and as long as it doesn't drop below 50, then expect the decline to stall and perhaps turn, but, if the RSI drops below 50 then that will trigger more selling. Next, some traders will sell when the DI lines on Wilder's ADX have a bearish cross which becomes a 'sell' signal when there is a close below the low of the day of the original bearish cross. However, other traders will wait for the ADX line to move up through the -DI line to confirm the sell signal and that will trigger more selling as well. So pay close attention to these two indicators in the early days of next week's trading.
And, of course, Geopolitical events are likely to going to be the most important factor in market direction next week.
GL & be careful.
SPX pushed back inside the rising price channel, which was at 1760, and then confirmed this was real on the following day. This put in place the possibility of a measured move of 120pts based on the width of the channel. At the time, I thought SPX would push to the upper channel line at around 1900, exceeding the 120pt target, but obviously that didn't happen.Now
SPX is moving within the confines of what appears to be a Bull Flag and rather than trying to catch a falling knife it is much safer for traders to wait for SPX to break out of the Bull Flag before initiating any new long positions, IMHO. I say this because there is always the chance that the current pattern may prove to be a falling price channel rather than a Bull Flag. A couple of things to watch for in the week ahead: The RSI is now just above 50 and as long as it doesn't drop below 50, then expect the decline to stall and perhaps turn, but, if the RSI drops below 50 then that will trigger more selling. Next, some traders will sell when the DI lines on Wilder's ADX have a bearish cross which becomes a 'sell' signal when there is a close below the low of the day of the original bearish cross. However, other traders will wait for the ADX line to move up through the -DI line to confirm the sell signal and that will trigger more selling as well. So pay close attention to these two indicators in the early days of next week's trading.
And, of course, Geopolitical events are likely to going to be the most important factor in market direction next week.
GL & be careful.
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