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Thoughts on where SPX is headed

|Includes: SH, SPXU-OLD, SPDR S&P 500 Trust ETF (SPY), SPY, UPRO

Two technical indicators: (1) the TOS proprietary sequential indicator loosely based on DeMark indicators and (2) the one standard deviation from the mean channel of the weekly SPX, imply that the broadest market indicator is overextended. The last time the SPX breached the one standard deviation channel on weekly charts was during the October '08 - March '09 leg of the bear market, indicating then the overextension on the short side.  



 
Despite the obvious overextension, the SPX downturn does not appear to be imminent. The SPX weekly sequential indicator suggests at least two more weeks of up-trend (or four more weeks of consolidation), while the one standard deviation from the mean of the daily SPX (see chart below), shows the index hovering just below the mean. The sequential indicator suggests the confluence of the uptrend exhaustion (both on weekly and daily charts) by mid-April.

  

I will consider entering short positions upon the confirmation of the correction (or the continuation of the overall bear market down trend).

 


Disclosure: None