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Sunday, June 02, 2019

SPX Triple Top: 2400 Target

My last post was not overly enthusiastic about a continued rally in the SPX, as evidenced by its title.

Now that the month of May is complete, you can see from the monthly chart below that a large triple top has formed on the SPX, which is, in fact, thanks to three bearish candle formations on this timeframe (namely, a dark cloud cover, followed by two bearish engulfing candles) -- albeit it on successively higher swing highs -- after overshooting its upper edge of a long-term ascending regression channel and reaching its +3 standard deviation level.

Its target, if it continues to drop, is the lower edge of this regression channel around the 2400 level, which also happens to converge with its 50-month moving average (red).

All three technical indicators, the RSI, MACD and STOCH, are signalling further weakness ahead.


Price on the following monthly chart of the SPX:VIX ratio closed the month just below the 150 Bull/Bear Line-in-the-Sand level.

Note that there are three bearish engulfing candle formations on this ratio on successively lower swing highs...a bearish divergence from the monthly swing highs on the SPX, as noted above.

The Momentum indicator (MOM) closed below the zero level, hinting at further weakness and rising volatility ahead for the SPX.


While we may see some shorter-term attempts at weak rallies, I think the SPX will eventually reach the 2400 level, or lower...provided that the SPX:VIX ratio remains below 150 and that MOM remains below zero...two gauges to monitor in this regard.