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SPX Update: Topping Patterns Worth Watching

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If support fails, the patterns get uglier.

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There's no material change to the outlook since I suggested selling the bounce on Tuesday, so in this update we'll examine a few developing patterns and let the charts do the talking.

I've detailed the 10-minute chart with support and resistance lines, and notes on the potential topping patterns. Also note there is theoretical support crossing the first target zone.


Click to enlarge

The hourly chart is unchanged:


Click to enlarge

On the five-minute chart, there are some notes regarding possible near-term pivots. Yesterday's "best guess" projected path played out quite well for the day, but that in itself doesn't guarantee another wave down immediately -- one of the things that never ceases to amuse me is how often "The They" manage to close the market at gray levels.

I simply can't foresee the bend here just yet, and it's possible that wave C is subdividing into a larger five-wave form, which would be significantly more bearish (shown in black). I feel obligated to at least note there is another possible pattern here which extends this move sideways/up, but in the interest of clarity I'm not going to discuss it unless the market gives me reason to.


Click to enlarge

In conclusion, the bulls are still clinging to hope with the possibility of a larger triangle pattern (as shown in the hourly chart), but I'm strongly leaning toward the idea that even if we see a larger reaction rally here, it will be wave (2) of C and ultimately make the picture even uglier for the bulls. Trade safe.

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No positions in stocks mentioned.
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