Looking Back and Forward on the SP500 Slow Creeper Trend

Mar 5, 2010: 12:47 PM CST

Today showed another example of the theme I’ve been highlighting – literally – on the blog, showing multi-day rallies in the S&P 500.  Today confirms that we are in yet another ‘highlighted zone’ as has been the cycle of the past.

Let’s take a look at these regions, the present chart, and what to expect going forward.

First, I’m using two new tools that I don’t often show on the blog, and that’s because they are giving us hidden bullish strength signals.

The first is the “Accumulation/Distribution” volume-based indicator, and then the OBV or “On-Balance Volume” (also a volume-based indicator).

Without delving too deeply on these, I wanted to show that both of these indicators are making new highs above their early January 2010 peak while the price of the S&P 500 Index is not – that is a ‘hidden’ sign of strength that forecasts higher prices… like those we are seeing now.  It suggests that price could continue to test if not rise above the 2010 peak of 1,150.

With that ‘futuristic’ comment said, let’s look back at the highlighted regions which represent “short-squeezes” and multi-day rallies (without stopping) that have often triggered after a bearish signal (such as a break of a moving average) occurred.

See the following posts for more insights into these highlighted regions:

The 12 Failed Sell Signals on the S&P 500

“Recent Bull Traps and Sell-offs in the S&P 500?

Recent Failed Sell Signals and Short Squeezes in the SPY

If History Repeats, Will it Mean New Highs for S&P 500?

The following posts are excellent examples of how to take current market “character” and forecast the potential future:

“New S&P 500 Highs Forecast by Fifth Sprung Bear Trap”

Could S&P 500 be Building Yet Another Power Move?

There have now been six examples prior to the current move that have unfolded almost identically – with anywhere from four to nine straight days of advances in the broader market, despite any bearish commentary or signals.

The current situation places that number at seven, as seen in the highlighted regions above.

What is the implication?

This is the reality of the current market in which we trade, which has a hidden (although it’s now blatantly obvious) bullish undercurrent/bias despite whatever the bears/sellers throw at it.

And in fact, the rallies are perpetuated in part by the short-covering (‘popped stops’) of the bears.

Take some time to study these examples and use the knowledge to your advantage as long as history continues to repeat itself.

Corey Rosenbloom, CMT
Afraid to Trade.com

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

10 Comments

10 Responses to “Looking Back and Forward on the SP500 Slow Creeper Trend”

  1. terlyn Says:

    Let's see which is more accurate…on the DOW, Elliott Wave International has called 105380 as the end of the countertrend wave 2 up.

    Trade what you see always! As you have said multiple times.

  2. Corey Rosenbloom, CMT Says:

    That's true, Terry!

    Any break to new 2010 highs invalidates that count, and if we look to the recent past, it looks like price is set to test or break to a new high… if history repeats.

    But that's the benefit of being an intraday trader – you're able to trade price action and unexpected moves that are painful at best to swing traders. Price (and supply/demand) is king!

  3. Doug Jones Says:

    Elliott Wave has been wrong for about 6 months now. I am one of those bears(shorts) that has fueled the popped stops rally for 7 times now. I am cancelling my Elliott wave subscription.

  4. terlyn Says:

    Of course, this is a setup for a double top.

  5. Corey Rosenbloom, CMT Says:

    Elliott Wave is one of many ways to forecast the future and trade/monitor price. Even when combining divergences in momentum, volume, and breadth, the market has continued rising.

    As a trader, we have to take in account the reality of the market, which – as I've been stating since mid-last year – has been thwarting the best-laid bearish plans (numerous times) and those who have been nimble to have picked up on this pattern have either prevented shorting or – aggressive ones have profited from it, especially intraday.

    It goes back to what I mentioned to Terry and is so true in all forms of trading – price, not opinion, is key. And as Larry Pesavento so eloquently titled his book, “Trade What You See, Not What You Believe.”

  6. wanessafruas Says:

    EW makes me very confused. Always a ziz-zag, impulsive wave with a-b-c-d-e fractal. Lots of counting and finally what we have? A new label! Do not u think, Corey?

  7. n2thezonez Says:

    One potential counterpoint on the chart:

    The 3/10 Histogram divergence a month ago proved meaningful. Another such divergence is present today.

  8. Bob Says:

    Hey Corey…
    Some conflicting measured move projections… hoping you might add some clarity.

    Off the Feb 5th low to the Feb high, a measured move projection targets $116.10;

    If one goes back to the early Feb. bottom, price formed a bear flag pattern, which contained a H&S pattern. The failure of that H&S pattern looks to be the “start” of the move (rally). Using this as a starting point, a measured move projection targets $114.10;

    Off the late Feb low, price rallied in a fractal five wave pattern up and formed a triangle at the top. The break of that triangle points towards further upside. A measured move price projection here, points towards a target of $115.88.

    So, I see three distinctive measured move price targets… can you offer perspective on these and how to weigh there respective significance?

    Thanks! Bob

  9. Bob Says:

    Hey Corey…
    Some conflicting measured move projections… hoping you might add some clarity.

    Off the Feb 5th low to the Feb high, a measured move projection targets $116.10;

    If one goes back to the early Feb. bottom, price formed a bear flag pattern, which contained a H&S pattern. The failure of that H&S pattern looks to be the “start” of the move (rally). Using this as a starting point, a measured move projection targets $114.10;

    Off the late Feb low, price rallied in a fractal five wave pattern up and formed a triangle at the top. The break of that triangle points towards further upside. A measured move price projection here, points towards a target of $115.88.

    So, I see three distinctive measured move price targets… can you offer perspective on these and how to weigh there respective significance?

    Thanks! Bob

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