Saturday, October 4, 2014

Another Ugly Week Is Ahead

SGS Market Timer Status:   SHORT 
as of close of 9/12/2014

Long Term Current and Past Portfolios

SPX is now trading in a well defined down trending channel.  On Friday SPX rallied and tested the upper channel line which happens to be Primary Downtrend Line (PDL).  Chances are excellent that selling starts again and SPX continues its decline within its price channel.

Last week as SPX sold off, it broke through and traded below two long term Active Uptrend Lines (AUL, shown in thick orange).  Price violation of those AUL's is significant because they have been shouldering the bull run since Nov 2012 and Oct 2011, respectively.   SPX very likely tests and closes below those lines again sometime this coming week.  That would signal additional selling for SPX to test its 200 D-SMA around 1900.  A close below 1900 for SPX before midterm election would signal two things:

  • Democrats are going to lose the Senate.

  • A test of Primary Uptrend Line (PUL) for SPX around 1880 is highly likely.  PUL support would likely hold and indices would rebound on the back of Reps victory and short covering.  The rebound would be short lived as we enter into an at least two year bear market.

Disclaimer: The views expressed are provided for information purposes only and should not be construed in any way as investment advice or recommendation.  Furthermore, the opinions expressed may change without notice.