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SPX: Top of the Bearish Wedge

 
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PostPosted: Sat Sep 02, 2006 7:08 am    Post subject: SPX: Top of the Bearish Wedge Reply with quote

The first chart shows SPX rose above resistance at 1,280 and 1,290 in mid-August on slightly heavier volume (although, a short-squeeze), generally held the 10-day MA on lower volume, and closed at the upper line of the bearish wedge Friday. Currently, some short-term technical indicators (not shown) are at the most overbought levels in years. Consequently, if SPX opens high Tuesday, after the holiday, it may begin a pullback to around 1,290 later in the week.

The second chart shows SPX (black line and right scale) made higher highs, while NYSI (blue line and left scale) made lower highs. Also, the arrows show, SPX sometimes topped after NYSI peaked. The CPC 50-day MA (above price chart) continues to fall from its all-time high and other sentiment indicators, e.g. AAII and ISEE, are also bullish. However, the NYMO 20 and 50-day MAs (below price chart) are near intermediate-term tops. Consequently, it's possible, SPX can rise to around 1,350 within a few weeks, although September is historically the worst month for the stock market.

The arrows are only five observations, which are not statistically significant. Consequently, SPX may instead trade between 1,280 or 1,290 (major support levels) and 1,326 (yearly high) for several weeks and then fall sharply through October, or perhaps the intermediate-term top is near completion and a sharp downturn may take place beginning next week. However, short-term and sentiment indicators suggest some type of pullback will begin next week and then a rally will take place. So, the 1,280 or 1,290 to 1,326 range may be most likely over the next two weeks.



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