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US 500 cash – NEW IDEA
The rising wedge pattern drawn from September and October 2014 has broken and a more cautious stance is now warranted. There is also a clear double top in play and a close through the neckline at 2038.9 would be a bearish development and would suggest a move to 1960 is on the cards. There is strong support around the 1980 area (as shown by the blue shaded area) that needs to break as well.
I would look at going short the S&P 500 cash on this break, placing a stop loss at 2070.
Price action however is a little more positive if we look at the daily chart and this is highlighted clearly by the long wicks on a number of the recent candles (see the right hand chart). Strong buying is therefore still in play and until these bids dry up the index is going to struggle to break the double top neckline.
On the weekly chart there is significant divergence (see left chart chart) with price making a higher high and the 14-day RSI and stochastic making a series of lower highs. This can be a powerful sign of an impending reversal and this weeks ‘doji’ pattern highlights clear indecision.