Rounded Arc a Bad Omen for SP 500

Oct 26, 2009: 5:05 PM CST

As I’ve been mentioning, the S&P 500 continues for form a “Rounded Arc” formation which appears to be the dominant technical structure on the S&P 500. Let’s take a quick look at this development.

What literally leaps off the chart is the multi-swing negative momentum divergence that has set-in prior to the 1,100 highs (so far) in the S&P 500.  Negative divergences often precede (or forecast) price reversals – moreso multi-swing divergences.

A simple divergence is one thing – multiple divergences are another.

In addition to the divergences, we see price itself structured in a “Rounded Reversal” or “Rounded Arc” pattern beginning with the October lows near 1,020.

Except for one minor blip, the price has remained completely contained within the upper and lower arc as shown above – that takes precision and balance… and also forecasts the road ahead for prices provided we stay within these arc trendlines.

It would seem as if an up-move was the next likely short-term move ahead in the market (bouncing off support of the lower arc trendline and the 200 period SMA on the 60min chart) – perhaps to the 1,080 range, however should sellers step up and force price outside the lower trendline (where we are now), then we would see an acceleration to the downside and a potential collapse back to 1,020… but we’re not there just yet.

Continue following this structure as well as the upper and lower ‘arc’ trendlines as shown above.

This chart – along with more analysis as to the current structure and opportunities – is included in today’s 9-page PDF “Idealized Trades” report for subscribers.

Daily Idealized Trades reports serve two functions – first to teach intraday trading through explanations of numerous examples of intraday trade set-ups, structure, and opportunities; second, to include ‘forecasting moments’ such as the chart above where we look at current structure and assess possible opportunities into the next trading day.

Visit the “Idealized Trades” information page for sample reports and subscription information.

Corey Rosenbloom, CMT

13 Comments

13 Responses to “Rounded Arc a Bad Omen for SP 500”

  1. Rd99Hse1 Says:

    And now with $BIDU a/h – …..*gulp*

  2. dumbpainter Says:

    can't help but wonder if “Raiders of the Lost Ark” will return and buy this weakness all the way to X-mas.

  3. Corey Rosenbloom, CMT Says:

    You're right – for those who don't know – as of now, BIDU (Baidu.com) has fallen around $50 from today's close in the after hours market. If this bleeds over into tomorrow – then we will not bounce up off the lower trendline but instead will shatter through it.

  4. Corey Rosenbloom, CMT Says:

    Always a possibility but how much buying pressure remains without allowing at least a small retracement?

    'Tis a wild market environment now.

  5. JeffreyLin Says:

    very artistic corey. bust out the protractor

  6. JeffreyLin Says:

    RE: $bidu. if u get a chance, do a quick post on China's index or Hong Kong hang seng. thanks homie

  7. Mandeep Singh Says:

    Good analysis!

  8. ngbstl Says:

    Curious is this actually a “mathematically-derived geometrically-consistent” study/drawing that was applied to the chart? …or just a approx best visual fit that you drew yourself? thx!

  9. Rd99Hse1 Says:

    …and thanks as usual for your good analysis. I would welcome a bleed over/pullback.

  10. Dan de Man Says:

    Thanks Corey! Looks like a swing traders paradise to me.

    Cheers,
    Dan

  11. Corey Rosenbloom, CMT Says:

    Hey Ngbstl,

    Like any trendline, it is the best-fit approach, using the “arc” tool in Snag-It (screen capture software).

    It would certainly be nice if software could auto-draw trendlines, but since they are not an exact science in the markets, arcs fit the same definitions of standard trendlines.

  12. Dan de Man Says:

    Hey Corey, I was just looking at oil and it has the same pattern.

    Cheers,
    Dan

  13. Dan de Man Says:

    Hey Corey, I was just looking at oil and it has the same pattern.

    Cheers,
    Dan