Aug
This is the update of my Aug. 9th post,
In my last post, I said that the uptrend was weakening and may have topped, and indeed the market fell sharply this past week. Price fell straight through both S3 and S2 while remaining below any resistance curves. This is the Midas definition of a down trend – breaking supports while holding resistances. The uptrend that was broken is the very short term one that was being followed by that three-fold hierarchy of support curves – S1, S2 & S3 – a timeframe of a few weeks or so.
Within this daily bars chart, which I have loosely called The Short Term, there is room to identify two different timeframes – a very short one of a few weeks, and a somewhat longer one of a few months. Right now, we see that the very short term uptrend that started July 1st has ended, and it looks like, on this very short term timeframe, that a new downtrend may have started.
But look at what happened last Thursday. Price gapped down, but came to a screeching halt right at S1, and on Friday it consolidated there. Midas technique tells us that when price comes down to the S1 and doesn’t go below it, that indicates that we’re still in an uptrend, but on a somewhat longer timeframe. So, we had a completed one-month uptrend within what may still be an uptrend on the several months timeframe.
In this coming week, how price behaves w.r.t. S1 is very important. If price rises off S1 without having penetrated below it, that would indicate that we’re in an uptrend on the several months long timeframe. And indeed if one wanted to trade on this timeframe, a rise off S1 would be a good long entry, with a stop just below S1. (Caveat: See my disclaimer!)
But if, in this coming week, price breaks below S1, that means that on the several months long timeframe, we’re just in a consolidation, one which actually started in June, and is defined by that gray horizontal line.
In future posts, I’m going to pay more attention to the two different timeframes that can co-exist on one chart.
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3 Responses to “S&P 500 Short Term – The drop may have stopped.”
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I’m an idiot for commenting, but what the heck…I was wondering about the low volume candles on Thur-Fri, even though it slowed down the descent, whether BottomFinder would confirm volume runout of the decline (I don’t know how to set up the anchor points, so I’m just following the basic theory of BottomFinder). The seven bars that define the S3 ride up seem to imply a bit more down volume to go–Wednesday’s volume was above normal, but not a killer chunk to offset the seven fairly light rising days.
And LOOK at that MoneyFlow! Is that a “break down” through the pennant bottom? Not in oversold territory, yet.
Regards,
Dr. Kiele,
Dr. Kiele,
Thank you for you comments and questions, and I’m sorry for being so late answering.
In order to apply the BottomFinder to the descent that started this month, we’d need a much larger number of candles on the chart than are available on this daily bars chart. So, one would have to drop down to, say, the hourly bars chart and apply it there.
Yes, that money flow chart is very interesting. I don’t call it “breakdown” because I don’t know what that term would mean on this indicator. The way to use this indicator is to see if it is diverging from the price, and it certainly did show divergence downward as price went up from its late July high to it higher early August high.