The markets closed Tuesday on a ledge over an abyss of significant new lows. Let's take a look at the charts we have been following for the past ten days.
First the 60 minute chart of the SPX. On the right is our trusty wedge containing prices since the beginning of 2009. Today prices fell right to the bottom trend line of the wedge, while the FBS oscillator fell all the way to oversold from overbought. Normally, this stochastic indicator would be signaling some kind of bounce from current levels. But it is perilously close to declaring this a "False" stochastic signal by recognizing a down trend, thus negating any strength.
On the left chart are my trend-bias signals that alert me to short-term changes in trend. We haven't talked about these indicators yet, but I expect to post more about them in the near future. Note how well those trend signals followed the market both up and down. Powerful stuff.
Next, our Weekly chart of the SPX:
Again, prices are resting right on the bottom ledge of support. Will they fall off the ledge, or bounce back to the top support line from last October? The EW software says no bounce, or if there is one, it will be of little consequence and new lows below 750 are on their way.
Let's zoom in on prices and look at the 15 minute chart:
Thw horizontal black line on the right chart is our, "ledge," it is the bottom support line of the wedge from the Weekly and 60 minute charts. You can see a violation of the support line over the last six 15-minute bars. Conclusive?
Here's another close up of the same chart:
What we see here is a clear violation of that ledge, a FBS signaling a down-trend and although not shown, the software is projecting a Wave 5 SPX low under 750.
The weight of the evidence is that Wave 4 has ended and Wave 5 has begun it's descent to new 52 week lows and beyond. The forecast is that at a minimum, 750 basis the SPX will be breached and that lower targets under 700 are possible.