· The Index broke down below the short term rising trend line and also deleted the path of higher lows established on the chart since early March 2015.
· These two developments are negative and argue for a move lower towards the bottom of range and 200dma at 2,028-2,040.
· Most interesting for those who favor cycles, if you measure the high from 1999 and 2007 and then measure the same time frame from the 2007 top you will find that last week top on the S&P was established exactly after the same time frame.
· When adding all of the above to other technical indicators such as: extremely wide gap between weekly moving averages and price, divergence on RSI & MACD, lack of momentum and decreasing volume (liquidity!) in the market, low percentage of stocks above their 200dma (66%), low percentage of stocks making new 52 highs (1.39%) – all of the above point out to a high like hood that the Index should head lower in a medium term view.
Strategy: Short 0.5 unit from mkt price, add 0.5 unit on a rally to 2,090, target 1965 with a stop at 2,025.
Daily chart
Weekly chart
Monthly chart
