SPX analysis and predictionIn this post I will be making some projections and will also try to walk through the thought process to make those projections.
Note: This is not Finacial Advice these projections are just some calculations based on the data we have currently, if the data changes, projections are likely to not play out.
I am sure many of you might have already seen this rising wedge pattern on the chart on Weekly timeframe suggesting a drop in price over the coming weeks. But the thing with patterns is that they are subjective, and based on what your bias is you may see only certain types of patterns on the chart, that's why it important to remain neutral and look at the data objectively from all perspectives.
Here are some other patterns which we can draw on the SPX.
1. Ascending Triangle about to break to the upside
Symmetric Triangle is a pattern of indecision which is About to break to the upside
So, we have three different patterns on the chart, one bullish, one bearish and one indecisive. We need a way to break the tie between patterns to find out which one has the higher probability of winning.
Let's take help from indicators.
I have added RSI on the weekly chart, here the picture starts to become slightly clear, we have RSI rising buy in a wedge which is a bearish structure and likely to breakdown over the coming weeks.
Let's Zoom in a bit get a clearer picture, here is the chart on Daily TF
I have added all the bearish divergences I see.
Based on above analysis, the picture is becoming clearer, we have one bullish, one bearish pattern on the chart, but we also have one bearish pattern on RSI and several bearish divergences which makes probabilities in the favor of bearish pattern playing out higher.
Now if we look at all the patterns, except the bearish pattern all other patterns have run out of room and are about to break out to the bullish side, which can create turbulences in the execution of the bearish patterns over coming days and weeks, but the divergences are in front of us ,there less and less people willing to buy at these levels , so if we start to move up a bit its likely to fall down fast.
Now that we have established that the probability is higher for bearish side to play out let's make some measurements for targets.
I have trend-based fib time to help us with times when the Pivots are likely to form, based on the theory pivots are likely to form, including and between .382 and .618 projections of the trend.
I have also added two measurements of the Falling wedges we have one in green and another one in blue, the green measurement of green wedge falls at a remarkably interesting time (19th of June) and 5 days before that we have FOMC events which are known to create pivots.
I have also added a trend line from the top which caught the previous bottom and the green measured move falls perfectly on that line. Now if the line holds, I am expecting only a temporary relief, and continuation downwards towards the second measured move due to the wedge in color blue.
I have added two harmonic Structure which appear on both weekly and Daily Timeframes for the longer term measured move.
PRZ of these structures falls precisely close to the measured move and the red trendline intersections.
Now that we have long term movement captured, let's look at short term movements.
We are forming a diamond pattern on Daily TF, this pattern has 50/50 change to break to either side, but if this pattern is formed after a move up, the probability is slightly higher for a break to the downside. I have added measured moves and tried to match it with the larger pattern (disjoint channel), this move intersection with time is also an interesting one as it falls on the weekend of 9th June and on the first day of next week ( 13th June ) we have CPI release.
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