MidWeek Color Bar Chart of the SP 500

May 27, 2009: 9:42 PM CST

Some readers enjoy seeing my “color charts” of the S&P 500 and here is a mid-week “Color Bar” update on the S&P 500 Daily Chart structure.

The color of the bars is derived from an average true range function of the most recent swing high (about 935).  Subtract 2.5 times the current ATR to ‘flip’ the color from green to red, or officially confirming (locking in) a swing up and beginning an official swing down.  This is an alternate way to define price ‘swings’ as opposed to noting absolute swing highs and lows.

The yellow bars are simply ‘warning signs’ hinting that we could be getting a color reversal soon.

In this case, the red bars will flip should the S&P 500 hit the 875 level, which would be the official “volatility” adjusted beginning of a new downswing.

This formula was originally published by Wells Wilder and adapted by LBR Group into TradeStation functionality.  The 3/10 Oscillator was brought to the public’s attention by Linda Raschke.

Notice also that the 875 level roughly coincides with the rising 20 week EMA, which if broken, would set-up a sudden ‘magnet trade’ down to test support at the rising 50 day EMA.  If the EMA support at 865 is broken, then we’ll have to turn to our Fibonacci retracements to find possible support levels.

Beyond the color bars, notice the persistent negative momentum divergence that has formed with price.  That’s bad news for the bulls, but it’s bad news the bulls have been shrugging off for some time – bulls have been wildly resilient in this recent retracement swing up.

Right now, the color bar study is showing caution for the bulls, and the next red bar will appear if the S&P 500 breaks beneath 875.  Let’s continue to watch that level closely.

Corey Rosenbloom, CMT
Afraid to Trade.com

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21 Comments

21 Responses to “MidWeek Color Bar Chart of the SP 500”

  1. chandu Says:

    Hi Corey,ur analysis on markets are very good,iam from india,whatever u say about levels it will be 100% correct,god bless u.

    regards
    chandu

  2. Da_bears Says:

    how do you make a chart like this/where do you find it? thanks

  3. Bh Says:

    Can you please explain us the Elliot Wave theory by taking an exaple of National Stock Exchnage India (Nifty).

    Thanks

  4. Bob Says:

    The battle between the bulls and bears continues. Who will win out?

    Price rallied to a major level of resistance at 935 and has since tested a confluence zone of support at 880. A triangle is forming, tension is building and that “potential energy” will be released.

    RSI also shows a clear divergence with price that favors the bears. Does this imply a possible break to the downside? While evidence is strong, the bulls have repeatedly shrugged off the bears efforts to retrace.

    The reality is price could go either way, but at the moment oscillators are pointing to a downward directionality. So, the question is,… if it breaks either way, where are the probable target levels of support or resistance which price will move to? And, how do you play a consolidating triangle, so you don't get spanked?

  5. sahil kapoor Says:

    whats ur take on oil. i think its nearing exhaustion-

    this is my view on oil – http://sahilkaps.blogspot.com/

  6. Don-Da-Mon Says:

    Off topic a bit, but since this graph represents a different way of looking at things, I noticed something yesterday that I hadn't recognized before. From about 1:50 to 2:50 the SP500 and the Dollar Index didn't move opposite each other. The dollar dropped, but the SP dropped also. In dollar terms the SP really lost value. The rest of the day the SP and Dollar moved opposite each other. I believe during this time frame index funds need to close their positions , or something like that. So, I wondered, …. If all the action from 1:50 to 2:50 each day were taken, and a technical analysis done from just that period of time, what would we see? Some say that ETFs have caused some of the volatility in the markets. So it would be interesting to see just what effect it is having. Thoughts?

  7. Corey Rosenbloom, CMT Says:

    Thank you Chandu!

    I wish everything I said would be 100% correct! I try to point out key areas to watch closely for possible inflections based on multiple sources of confluence – these tend to work more than not, but if there were anything 100%, I'd like to know it!

  8. Corey Rosenbloom, CMT Says:

    Da-bears

    These are from TradeStation indicators I received from attending a seminar with Linda Raschke in 2006 and thus can't share them.

    I described a little of the theory behind the colors but this is proprietary and I really can't go into much more detail than I have in the post.

  9. Corey Rosenbloom, CMT Says:

    That's a big question!

    I'm developing a series of “Cheat Sheets” on Elliott Wave, and have done posts in the past on the Nifty with Elliott Wave analysis. Do a quick search in the toolbar to find all of these posts and feel free to browse around.

  10. Corey Rosenbloom, CMT Says:

    Good insights Bob! Thank you for sharing.

    I prefer not to anticipate triangle breaks, but rather join the winning side – personal preference from experience.

    Draw a Fibonacci grid from the May highs to March lows to find Fibonacci support. As for resistance, look for higher swings to draw Fibonacci off the March lows and also look for prior swing highs as logical targets.

    With a triangle, you're still better off waiting for the break no matter what the indicators are saying – consolidations represent a market in balance, and – like a snowball rolling down a hill – any break will often lead to a trend move. It's no fun to be caught on the wrong side if you try to anticipate it – I suggest waiting.

  11. Corey Rosenbloom, CMT Says:

    Don,

    You raise a very interesting topic – one definitely worth further research! I don't have the answer now but I'll try to look into it. Feel free to share any insights you find as well.

  12. Bob Says:

    Patience is a virtue.

  13. meques Says:

    wow, choppy day today. tired lit bit.

  14. Don-Da-Mon Says:

    Off topic a bit, but since this graph represents a different way of looking at things, I noticed something yesterday that I hadn't recognized before. From about 1:50 to 2:50 the SP500 and the Dollar Index didn't move opposite each other. The dollar dropped, but the SP dropped also. In dollar terms the SP really lost value. The rest of the day the SP and Dollar moved opposite each other. I believe during this time frame index funds need to close their positions , or something like that. So, I wondered, …. If all the action from 1:50 to 2:50 each day were taken, and a technical analysis done from just that period of time, what would we see? Some say that ETFs have caused some of the volatility in the markets. So it would be interesting to see just what effect it is having. Thoughts?

  15. Corey Rosenbloom, CMT Says:

    Thank you Chandu!

    I wish everything I said would be 100% correct! I try to point out key areas to watch closely for possible inflections based on multiple sources of confluence – these tend to work more than not, but if there were anything 100%, I'd like to know it!

  16. Corey Rosenbloom, CMT Says:

    Da-bears

    These are from TradeStation indicators I received from attending a seminar with Linda Raschke in 2006 and thus can't share them.

    I described a little of the theory behind the colors but this is proprietary and I really can't go into much more detail than I have in the post.

  17. Corey Rosenbloom, CMT Says:

    That's a big question!

    I'm developing a series of “Cheat Sheets” on Elliott Wave, and have done posts in the past on the Nifty with Elliott Wave analysis. Do a quick search in the toolbar to find all of these posts and feel free to browse around.

  18. Corey Rosenbloom, CMT Says:

    Good insights Bob! Thank you for sharing.

    I prefer not to anticipate triangle breaks, but rather join the winning side – personal preference from experience.

    Draw a Fibonacci grid from the May highs to March lows to find Fibonacci support. As for resistance, look for higher swings to draw Fibonacci off the March lows and also look for prior swing highs as logical targets.

    With a triangle, you're still better off waiting for the break no matter what the indicators are saying – consolidations represent a market in balance, and – like a snowball rolling down a hill – any break will often lead to a trend move. It's no fun to be caught on the wrong side if you try to anticipate it – I suggest waiting.

  19. Corey Rosenbloom, CMT Says:

    Don,

    You raise a very interesting topic – one definitely worth further research! I don't have the answer now but I'll try to look into it. Feel free to share any insights you find as well.

  20. Bob Says:

    Patience is a virtue.

  21. meques Says:

    wow, choppy day today. tired lit bit.