A Glance at the Daily NASDAQ and SP500

What a week we just wound down.  There was contraction in volatility and a possible triangle consolidation formation, but by Friday we had a lock-limit down move on the US Equity Index futures and the NASDAQ making fresh new 2008 closing lows.  Let’s see these up close and personal.

First, the S&P 500 Daily Chart – hovers above fresh 2008 lows:

We actually did make a new closing low (technically) on the S&P 500 for 2008, but not an intraday low.  Look closely to see the volume action on the recent pattern – volume surged as the pattern began (capitulation) and then contracted as the triangle continued (showing lack of confidence from the buyers – a hallmark of a true triangle consolidation/continuation pattern), but volume is again rising to the upside as the pattern completes (possibly breaking out to the downside).

The moving averages are in the most bearish orientation possible (20 beneath the 50 which is beneath the 200) and price is over 100 index points away from the 20 day EMA – signifying a retracement back up is likely but certainly by no means guaranteed – particularly if momentum continues to increase to the downside.

The ‘hammer’ bullish candle-pattern, as well as the test of the rising trendline from the triangle – have both failed on Friday’s action.  Price closed beneath the trendline and beneath the open of the hammer, signaling bearishness and invalidation.

The momentum oscillator is also hooking back down.

Let’s take a quick look at the NASDAQ Index to see a similar pattern, with the only major difference being an obvious fresh 2008 closing and intraday low.

Second, the NASDAQ Daily Chart – making new closing lows.

The analysis above applies to the NASDAQ as well, only we are roughly 250 points away from the 20 day EMA.

For additional insight into the triangle consolidation (which is now appearing to form a possible descending triangle), let’s see the S&P 500 60-minute chart.

Finally, inside the triangle consolidation on the S&P 500:

There’s a little oddity occurring, as price is trending downward but momentum appears to be rising, in fact possibly forming a triple-swing positive momentum divergence.

Price on the hourly chart is also under all key moving averages, and they are also in the most bearish orientation possible.  Price is also ‘nipping’ at fresh lows which would come in beneath the 840 level.

Keep a very close watch on the 860 to 880 level – if we can find some support here, we still could break to the upside but we’d have to clear that 940 to 960 level which is the upper (descending) trendline, which will become a target if we exceed the 900 level (above the 20 period EMA).

Until then, the larger structure remains bearish, and the trend is clearly down.

We’re likely in an Elliott Wave 4 (sub-wave fractal) of a larger impulse down, but keep in mind that corrective patterns tend to be quite difficult to classify and trade by their very nature of the fight or intense struggle of buyers and sellers – of bottom-fishers (and long-term value players) with short to intermediate term sellers of all types.

Hang on to your account – we’re not out of the woods yet.