MadScientist Quick Pre-market Analysis - 29 July 2011

The S&P500 E-mini futures had some very interesting action this week and it is time to review that action and what it is suggesting for the coming week.
The weekly chart over the past year shows a stalled rally that is forming a head & shoulders pattern, currently the right shoulder is in the process of completion. The 1260 level is the H&S support to watch as breaking of this level suggests a target of 1190-1200. Sell signals were given late in the left shoulder, at the peak of the head, and there should be a Sell signal by next week. The indicators are weakening and suggest a bearish undertone. A weekly Buy Setup is starting and this may put a nine week setup till October 2011.

The daily chart over the last 6 months show an ugly shoulder formation with a lower high that had broken the uptrend support line on Wednesday 27 July 2011. A Buy Setup is in the third period today and the first level to watch is whether the TDST at 1271.5 will be broken decisively over next week. Currently, the charts are telling of a Down Friday, given the deadlock in US Government about the debt ceiling, amid downgrading threats from rating agencies. The indicators are bearish… with RSI going well into bearish territory, as are the Stochastics and Force Index.

The 30 minute charts show of a recent downtrend that tested the uptrendline as a resistance intraday and the RSI at this level bounced off the bearish resistance. The MACD is also showing that there is consistent downward momentum. The Force Index should should later today a stronger down force, especially when the MACD lines are in bearish territory and turning over. It is also observed that the Gann Swing points are still making lower lows, making the downtrend intact for the very short term.

Looking at the SPX chart with the TTR indicator, when it is <0.85 and starts rising, the market tanks. This has happened in the last 2 years and is looking to happen again. Watch this space!

MadScientist – 29 July 2011