SP500 Color Bar Daily Chart Update May 4

In a follow-up from this morning’s post “Competing Patterns and Levels to Watch in the S&P 500,” let’s pull the perspective higher than the intraday chart and look at daily levels to watch, and use the “Color Bar” chart as a guide.

S&P 500 Daily:  Color Bar Chart

A quick glance shows us two key levels to watch.

First, the rising 50 day EMA (blue) rests at 1,171, which is the low so far for the trading day (as of 11:00am EST).  That could change quickly, so for now, use this level as a key reference – 1,170.

As I mentioned earlier, the second level of potential key support under 1,170 is the January 2010 price high at the 1,150 level, which would likely be a magnet if sellers took the index down firmly under 1,170.

Notice also the lengthy negative momentum divergence (3/10 Oscillator – color) that has undercut the latter half of the rally from the February 2010 low at the 1,050 level.  That’s a bearish warning sign that is now potentially seeing the ‘snap-back’ decline that the divergence forecast.

The color bars have turned red, indicating that we have ‘locked in’ an official up-swing that lasted from the February low to the recent 1,220 high.  We are now in an official down-swing to find support… but where will be the question.

The color code is based on an Average True Range function coded by Linda Raschke’s LBR Group and is an alternate (more official) way to classify swings in the market.

Keep the 1,170 reference level in mind, and if we’re solidly under that, then we’re likely to see 1,150.

If under that… we’ll discuss it when and if sellers take us there.

Corey Rosenbloom, CMT
Afraid to Trade.com

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