Diary of a Financier

Intraday Update: SPX (ES) Shaking 2011 Analogue

In Capital Markets on Mon 14 May 2012 at 10:21

Quick note from the open in NY. I dropped off two StockTwits over the weekend:

Indeed, my last SPX update discussed my mistrust of the classic bull pennant pattern, in favor of bearish technical indicators. Today’s trading session opened with the S&P 500 (SPX) and Futures (ES/) @ ~1335, trading below their 2-sigma lower band. Referring back to my 2011 analogue, I find an inverse Head & Shoulders marking that year’s market top, before a classic breakout rally above its neckline painted a major, cyclical, blowoff top. Were we to maintain that analogue this year, SPX would have to bounce out of a lowly close today, with the low characterized as the “Head” of the classical H&S pattern. This would have to occur precisely tomorrow, because 2011’s outsized downward move (beyond 2-standard deviations) quickly mean-reverted to form that inverse H&S–the last gasp of a bull run. A lack of similar mean-reversion today would be irrefutably bearish:

ES- if SPX is to maintain its analogue to 2011, it will have to bounce from a close below 2-sigma lower band with an inverse H&S manifesting.

I do not expect 2012’s market to continue tracking 2011 at this juncture. Technical Indicators have been derailed from the analogue, communicating a different sentiment and psychology among investors this time around:

ES- daily shows airpocket down to 1254 support, longer fractals exhibit bear divergence.

Further, SPX is trading below my 1342 final support, underneath which is an airpocket for a gap down to next support at 1254. Bracing for lower lows here. More to come on this.

–Romeo

Advertisements
  1. […] Analogue- SPX can continue tracking its 2011 analogue and rear an inverse Head & Shoulders that will take us from today’s lows (1330) to a neckline (1405) back to the right shoulder […]

  2. […] recently noted the decoupling of the S&P 500 (SPX) from its 2011 analogue.  Specifically, the technical […]

Comment

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s