Scenarios

The cash S&P500 market reversed gears and closed higher on Wednesday forming an uptrending day. The downward moving price pulse from Friday’s high of 1488.94 was complete at 1460.66. Both volume and price movement increased Wednesday which is bullish.

Needless to say nothing was resolved yesterday. The rally went right up to the neckline of a proposed inverse head and shoulders pattern discussed yesterday. Note that this is also just below the long term (green) moving average as well as strong chart resistance at the 1490 level (see yesterday’s chart). The challenge for the bulls is to cleanly break through that resistance. Supporting the cause is the fact that the negative reversal on the daily RSI has been negated and so the current technicals are bullish.

Here is a unique take on the daily chart based on some experimental timing work I am engaged in. There are a few scenarios.

A) If the price pulse low of 1460.66 marked a significant low then we should rally until into the week after next. If 1460.66 was not a significant low then the question revolves around whether 1488.94 was a significant high.

B) If 1488.94 was significant then the market will fail to break above 1489 here and fall for about a week.

C) If 1488.94 was not significant then we will make a high over the next few trading days and then pullback for a few days.

My pending long trade of SPY will be o.k. if scenario A unfolds. I should not get filled under Scenario B. What concerns me is Scenario C. In that case I will get filled right before the market begins a correction.

Note to self: Of course Scenario C will unfold.