The cash S&P500 market put in another downtrending day on Tuesday as the downward moving price pulse from Friday’s high of 1488.94 (which is now a fractal high) continues to unfold. My data shows that volume increased slightly on Tuesday’s bar and that price movement continued to decrease, again forming what Bill Williams calls a “Squat” bar. The last time this happened we ended up with a price fractal high on 11/30. Now we should be watching for a low.The current decline from last Friday’s high can be seen as potentially forming the right shoulder in an inverse head and shoulders pattern. Note that the neckline (shown in orange on today’s chart) lines up with the long term (green) moving average as well as strong chart resistance at the 1490 level.
Breaking above (through) the 1490 area would be a sign of strength and would also negate the only technical negative I have, the negative reversal on the RSI discussed yesterday.
And so my course of action is set. I will go long the SPY on any move above 149.87. If filled my initial stop will be placed at either yesterday’s low or today’s low; whichever is lower.
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