by David G. Hawkins

Here is my monthly update of the daily, weekly and monthly bars charts of the S&P 500.

Short Term – Daily Bars Chart

The first chart here is the daily bars chart.  A lot of interesting things have happened on this chart since I last updated it on May 15th – see my last post here for comparison.  First, price plunged sharply down, hit and bounced up from the curve labeled “Old S1″ which was launched from the March 16th low.  After that, in only two days of strong uprising, it hit and turned down from the new R2 curve, which tells us that the downtrend that started May 2nd is still intact.  Then, in another two days, it went down and formed a bottom at a price level of about 1313, from which it rose sharply.

Now, looking at this chart in my last post here, there is no support curve at the 1313 level.  ”Old S1″ was up at 1319 and didn’t provide support, and the weekly S3 level was far below where price actually found support.  I always try to have set up in advance a ladder of support levels below price so we may watch price find support as it comes down.   But sometimes, price decides to find support at a level that one may not have previously identified on the chart, and that’s what happened here.  Look now at the curve in bold green on today’s updated chart, launched from the Jan. 28th low, one which heretofore I hadn’t kept on the chart.  It provided perfect support for the most recent low in price.  Sometimes this happens, since keeping every support curve on the chart would be too cluttered.

Here’s how to treat this situation in a methodical way.  As soon as it looks like price may be lifting off a previously unidentified support, go back and launch curves from older lows to see if one may be providing support here.  If you cannot find such, then one should not place much significance on the price rise.  However, if you can find a significant support curve that does explain the turning in price, then one would have confidence to base ones trades on such a price rise.

In the past week, price rose smartly from this recent support, blasted right through the new R2, but came to a screeching halt right at R1.  Therefore, this is a crucial point today; if price turns down from here, then the month long downtrend is still in effect; if price definitively breaks and closes above R1, then the downtrend has ended.  Today should be very interesting!

Intermediate Term – Weekly Bars Chart

The second chart here is the weekly bars chart updated through May 31st.  We see that over the last few weeks, price broke but did not close below S4.  Had it closed below S4, I would conclude that the uptrend that started last summer has ended.  But, those two breaks below S4 are a warning that this uptrend is weakening.  I would not at all be surprised to see price come down and test S3.  Both the Money Flow Index (upper pane) and the Volume Weighted MACD (lower pane) continue to show weakness.  The TopFinder is about 52% done, but as I said in my last post, I don’t have much confidence in that one proceeding to its conclusion.

Long Term – Monthly Bars Chart

The third chart here is the updated monthly bars chart.  We see that the most recent two candles are implying a top; and we see that price seems to be turning down from the 76.4% Fib level.  The TopFinder is about 3/4 done, looking like it has only a few more months to go, with its end projected to come at the dashed vertical line.  My opinion is that this TopFinder’s ending will dominate over the one on the weekly bars chart.

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