A Look at Recent Short Term Peaks in SP500

Nov 16, 2009: 3:22 PM CST

With today’s price action breaking a characteristic behavior of the prior four short-term swing highs in the S&P 500, let’s take a look at those four prior peaks and what the same and what’s different about the current ‘peak.’

S&P 500 Daily:

I’ve highlighted the prior four ‘swing highs’ or short-term peaks (prior to quick and short retracements back to support) in the daily chart.

On each, price was met with a negative momentum divergence and at least one (in August, almost five) doji candlestick at the highs of the upper Bollinger Band before a quick and sudden down day.

The behavior was for price to “chop” around at the highs indiscriminately before a sudden down-day formed.

I mentioned the liklihood for a new high based on reading the ‘behavior’ of the market (and seeing similar “sprung” bear traps) in my November 9th post:

“New SP500 Highs Forecast from Fifth Sprung Bear Trap.”

What’s different about this time?

For starters, price ‘looked like’ it was going to continue its retracement back at least to the rising 20 day EMA at a minimum, but today brought a swift and stellar upward candle (one hour prior to market close) which seemed to thwart the selling pressure or expected choppy environment.

Another difference is that there is perhaps one of the most distinct volume divergences I can remember seeing on a short-term daily chart of the S&P 500 in recent times.

I’ve been discussing that volume divergence in the following posts:

“A Look at Declining Volume on Five Prior Market Tops”

“How Else Can We Interpret Recent Volume Developments but be Bearish?”

With the 50% Fibonacci retracement of the “Bear Market” resting at the 1,121 level, let’s keep a close eye on price to see if buyers still have the strength to overcome this negative volume (and momentum) divergence and push through the long-term Fibonacci retracement zone.

Corey Rosenbloom, CMT
Afraid to Trade.com

Follow Corey on Twitter:  http://twitter.com/afraidtotrade

12 Comments

12 Responses to “A Look at Recent Short Term Peaks in SP500”

  1. ndimmick Says:

    After reading your post and Trader Mike's post about the same day, I'm confused about the volume on 11-16-09. My stockcharts.com chart shows a large increase in volume compared to 11-15-09. Is it possible that stockcharts.com revised their charts with updated data after you posted yours? If this is the case, does this change your opinion at all?

  2. Corey Rosenbloom, CMT Says:

    Hey ndimmick,

    Yes, the SPX volume is updated about 30 minutes after the close at StockCharts, and I took this capture with about an hour to go in the trading day so the chart does not reflect the end-of-day volume which was slightly higher than yesterday.

    No, one day does not invalidate a week of declining volume. TraderMike is picking up on the same themes I am.

    It's options expiration week so the volume will likely be higher this week and price swings potentially more volatile.

  3. Dan de Man Says:

    Looks like the markets are getting primed up to push tomorrow. Looks like we'll hit the magic 1121.

    Lots of full stoch 5 3 3 signals for USO EEM SPY UNG etc

  4. Corey Rosenbloom, CMT Says:

    Perhaps – seems a stretch (no pun intended) to get to those levels after around 10 of the last 11 days being up but OpEx weeks teach us sometimes to expect the unexpected.

  5. Dan de Man Says:

    Very true. That's why every trade should have an entry & exit strategy (no matter what happens), position sizing, etc.

  6. ndimmick Says:

    After reading your post and Trader Mike's post about the same day, I'm confused about the volume on 11-16-09. My stockcharts.com chart shows a large increase in volume compared to 11-15-09. Is it possible that stockcharts.com revised their charts with updated data after you posted yours? If this is the case, does this change your opinion at all?

  7. Corey Rosenbloom, CMT Says:

    Hey ndimmick,

    Yes, the SPX volume is updated about 30 minutes after the close at StockCharts, and I took this capture with about an hour to go in the trading day so the chart does not reflect the end-of-day volume which was slightly higher than yesterday.

    No, one day does not invalidate a week of declining volume. TraderMike is picking up on the same themes I am.

    It's options expiration week so the volume will likely be higher this week and price swings potentially more volatile.

  8. Dan de Man Says:

    Looks like the markets are getting primed up to push tomorrow. Looks like we'll hit the magic 1121.

    Lots of full stoch 5 3 3 signals for USO EEM SPY UNG etc

  9. Corey Rosenbloom, CMT Says:

    Perhaps – seems a stretch (no pun intended) to get to those levels after around 10 of the last 11 days being up but OpEx weeks teach us sometimes to expect the unexpected.

  10. Dan de Man Says:

    Very true. That's why every trade should have an entry & exit strategy (no matter what happens), position sizing, etc.

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