S&P 500: Bearish Divergence With A Caveat
Dr. Duru | Oct 04, 2012 05:03AM ET
: 65.9%
VIX Status: 15.4
General (Short-term) Trading Call: Hold
Commentary
The S&P 500 closed just under the wedge I pointed out in the last T2108 Update.
At this point, I would normally assume an upside breakout to a wedge formation. However, T2108 actually DECLINED yesterday, from 67.9% to 65.9%. This is not a huge difference but it was nonetheless surprising given the S&P 500 managed a marginal gain that took it to the upper limits of the wedge. This bearish divergance suggests that the more likely path is back down to the bottom of the wedge.
The huge caveat to this conclusion is the Australian dollar (FXA). AUD/USD looks like it is bottoming right at support formed by the closes for 2010 and 2011. The chart below zooms in on the action since July to clearly show the impact of this support line (the thick, black horizontal line under 1.02500). If this bottom truly holds up, I will have to get bullish on the S&P 500 given the last T2108 update , YELP seems poised for a big breakout given its behavior at this line of resistance is so different, and more constructive, than earlier blow-off tops.
Daily T2108 vs the S&P 500
Click chart for extended view with S&P 500 fully scaled vertically (updated at least once a week)
Black line: T2108 (measured on the right); Green line: S&P 500 (for comparative purposes)
Be careful out there!
Full disclosure: long SSO calls, YELP puts
Get The News You Want
Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.