This market is fickle, there is no question about it. There are more bearish divergences in the charts than I care to discuss, and yet the market keeps going higher. Evening the appearance of a evening star pattern didn’t bring this bull down… Yet..
While the markets exuberance seems unwarranted to me, the fact remains that the S&P has been heading higher… As long as it breaks 1150 with some conviction. The reason I say this is that the S&P has the potential to form a cup with handle pattern on the 15 min chart. For this pattern to play out, I’d expect a small 4 or 5 trading day pullback to occur in the near future, with support around 1143, the 50 period SMA. If 1150 is broken, I believe this market is headed to at least 1165 in the near term, and around 1228 over the next couple of months.
If however, the evening star pattern plays out, the support levels are 1136, 1132, 1130, and 1121, and 1113 (the 50 day sma). For the bearsh, there is one item of particular interest that I’m starting to track, and thats the On Balance True Range 9 period SMA is rounding over, the first time it has done that since early november. This could be just an indication of more sideways action, but with all of the divergences out there, it could also be signaling a short term top:
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