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Market Analysis - $SPX 8-5-12

Below is a chart of the $SPX. Let's jump right into the action:

This chart remains bullish, as we ping pong our way back and forth between trendlines. It does not matter that this action is created from European news, the Euro Crisis or a PIGS problem - the end result is still the same. This channel is rising and we are in line to work through the congestion that is 1392-1395. We have a bullish and rising RSI, we have a bullish and steady MACD, and slightly more volume on the trending up days than then trending down days.

I've drawn the trendline in purple - see where it has been resistance for the past two weeks or so? Look left, and you will understand why the pause has happened where it has. As the channel is rising it is only a matter of time before the candle can pop above the trendline. Is that where I want to be buying? NO. Have buying breakouts been working lately? NO.

The market could open up nicely tomorrow, break to a new high and then repeat the same action it did last May - breakout for a few days then basically go nowhere, essentially disappointing the market which will feed upon itself and gravitate toward a lower support. In this instance, I expect this to happen, with a retracement back to the 20ema which is rising, so I would expect that to happen in the 1375 range before springing up again.

We have some nice bullish technicals here, the moving averages are in the proper order, and the last run to the top of the channel started off of the 200ema then claiming the 50ema and now the 20ema.

How do you get in way up here though?

It's called patience. Look at the candle patterns - each time we had to wait for the candle to tag the upper bollinger band, which gave us a few nice days of down. If you bought at the top you are in a losing position. If you buy at the bottom of the move - which has been cycling between 3-5 days, you have a high probability trade. Traders repeat patterns until they don't work - and this one has been working for a few months now. My best advice tonight is to watch for wicks. Wicks are the top and bottom stems on a candle. If we start forming a top wick, it is an indication of reversal. Conversely, when we near a moving average to the downside, you will see a bottom wick form which is indication that move is done. Try watching it on the hourly chart so you can see it form a little faster and have the conviction to execute your trade.

This is my inaugural blog since joining McElhenny Sheffield Capital Management (MSCM). I would like to give public appreciation to those who have faithfully supported my efforts over the years, and express sincere gratitude to those whom have handed me the reins to grow our futures, our friendships and our portfolio's!


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Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.