Monday, 11 October 2010

Top Building and Move Back to 1070-1080.....

It looks like the market has already started the process of top building last week and a move back to 1070-1080 is in the cards.

Below is a chart of SPX with two indicators for volume and tick.

Starting with the volume indicator, red and green vertical lines represent sell and buy signals respectively.

Rewind to Sep'09-Jan'10 and we can notice how the volume indicator fluctuated in a range giving sell and buy signals (denoted as SS and BS) every time it was hitting the top and bottom of the range.

Fast forward to Jun'10-Oct'10 and we can see that the indicator is fluctuating again in a range with the top and bottom of the range giving sell and buy signals.

And here we are today, with the indicator giving another sell signal after giving the first one last week. Sure, it can break upwards like it did back in Mar'10, but for the time being we have to take the sell signal.

Add to that the fact that the tick indicator is exhibiting negative divergences for quite some time now and the move to 1070-1080 looks even more promising.

Is the volume indicator going to breakout or will it stay in the range and validate the recent sell signals? Stay tuned for  an update on the volume indicator tomorrow.

Click Chart to Enlarge

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