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S&P 500 Mid Month Review

by David G. Hawkins

Short Term – Daily bars chart

Comparing the first chart here with the daily bars chart I posted two weeks ago, we see that price strongly broke above both R1 and the Weekly R1 levels, but a few days later abruptly reversed direction and headed down.  Such volatility is not surprising, given the current turmoil in the world markets and the uncertainty regarding the U.S. raising its debt ceiling.  What’s interesting to note here is that in the last two days price halted right at the support curve that was launched in late January, a curve that had been confirmed by its support action in late May, so this is a very significant curve.

With all the uncertainty in the markets now, I wouldn’t dare to guess what price will do next on this short term timescale.  All I can do is position the support and resistance levels on the chart and watch what happens.

Intermediate Term – Weekly bars chart

On the second chart here, it’s now obvious that, since the end of the first quarter of this year, price has been in a wide sideways consolidation, bounded on the top by the Fib retracement level from the monthly bars chart and on the bottom by the S1 cal curve.  The Money Flow Index (top pane, the volume weighted RSI) and the Volume Weighted MACD (bottom pane) continue to show strong negative divergence with price, showing weakness behind the scenes in the market, implying that the breakout from this consolidation will eventually be to the downside.

Long Term – Monthly bars chart

On the third chart here, we see that the currently running TopFinder, TF4, is now about 85% done, with its projected completion somewhere between those two dashed vertical lines; the chart plotting software won’t allow me to position the vertical line at the exact location.  On this timeframe as well as the shorter one, the Money Flow Index continues to show negative divergence, suggesting that the move after the TF ends will be on the downside.

When I next post, at the end of this month, we’ll be only two days away from the deadline for the U.S. to raise its debt limit.  This is an unprecedented situation, and I have no idea what’s going to happen, other than to expect extreme volatility in the markets.