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

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