$SPX Daily, 03/10/2014: Losing momentum

11 במרץ 2014

SPX currently moving within confines of a rising wedge, which is a bearish formation. But everything needs to be confirmed, so if SPX rises up out of the pattern and keeps moving toward the upper channel line, then that would negate this pattern. This needs to be watched over the next several days to make sure SPX does in fact break out of the top and negate the formation.

The NNYSI, Summation Index has been losing momentum since the middle of last week. It rose to 1050 last Friday, the 7th, and today it dropped by a couple of points. It's not uncommon for the Summation Index to turn when it pushes above 1000 and if it is in fact turning then market breadth is weakening and when that happens the market will often pull back. Further, when the market starts to lose underlying strength, you don't need a catalyst to turn the market as the market will often fall of its own weight.

The Cumulative Volume Index fell by 800pts today when the NYA dropped by only 25pts. On Friday, the 7th, the Cumulative Volume Index fell by 493pts when the NYA fell only 13pts. Like the Summation Index, the Cumulative Volume Index is hinting at underlying weakness.

This rising wedge pattern and these two signs of weakness need to be monitored over the next few sessions. They can easily right themselves, but if they don't by the end of the week, then this has to be seen as a red flag warning.

IMHO, of course, and subject to change without notice.

GL