With April options expiration, and Friday marking the end of the 6th straight up week (wouldn't have been with a decent down day), as well as 875 SPX resistance so close to being hit, Thursday was a day to test that resistance and push the technical indicators a little bit more to the extreme.
We think Monday will be a big move day. A small change in NYMO Friday indicates a big move is coming, so we expect a big move early next week. Also, the Monday after expiration has had big market moves recently.
Friday's late breakdown of the rising wedge that formed over the last 3 days, combined with some extreme indicators and negative divergences, make us think the big move will be down. Below are updates to the charts we posted Thursday:
Here's the updated close-up chart of the 10-day EMA of NYSE TICK:
If Monday starts a pullback like the last 5 times this TICK 10-day EMA peaked over 600, the market should sell hard into Tuesday at least. If the huge rising wedge below breaks on this pullback, it should sell off much more.
Here's the updated chart of the % of S&P 500 stocks above their 50-day moving average:
Before this rally, spikes over 80% preceded significant selling. Friday, this indicator moved even higher, to 89.6.
Finally, here's the updated hourly chart of the S&P 500 showing a huge rising wedge along with a bunch of bearish divergences on PPO:
The PPO histogram has started to turn over, and it looks like PPO is making an incredible 5th lower high while the market makes a 5th higher high. A bearish cross of the black line below the red line would confirm the sell signal and the start of the pullback.
Many technical indicators are pointing to a pullback starting Monday. That worries us a little bit, because it seems almost too clear, especially given the exact hit at 875 resistance (like the early March exact hit on the devilish 666 support) and all the obvious rising wedges/ending diagonals with many clean trend line hits. If the market instead launches higher through 875 resistance on Monday, it could be a big squeeze move up rather than the big move down we expect. However, we think the chances of that are remote.