The weekly chart of the cash S&P500 index formed a downtrending price bar this week. Based on volume (lower) and price facilitation (lower) it was a week that indicated a fading of interest in the short side. This is interesting since the previous two weeks showed an increase in both volume and price facilitation; which indicated increased bearishness. Has sentiment changed? The candlesticks are supporting that notion as we had a “gravestone” form this week. This pattern is indicative of a possible bottom but it is prudent to wait and see how the price action behaves early in the next candlestick. The downward price pulse from the recent 1552.76 high continues.
Of note technically this week is the fact that the RSI turned up, which has produced two “positive reversal” signals. Price targets (minimum) are 1569.56 and 1561.95.
The Elliott pattern that best fits this technical evidence is a Contracting Triangle corrective pattern from the July high. We may just have ended the “c” wave of that correction. My roadmap for the final two waves of the triangle can be seen in this weekend’s chart. If wave “c” is not over I have left my two lower target zones on the displayed chart.
Bottom Line: The weekly chart does not conflict with the daily chart’s suggestion of a bottom being made. I feel comfortable looking for a long position in the SPY at this point.
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