Is the market topping or is this just another in a string of smaller “repeat top” patterns for the S&P 500?
Let’s take a look at a recently repeating pattern and chart the levels to watch if history does indeed repeat.
I highlighted three similar periods where the following factors developed on the chart:
- Retest of prior high (slight new “all time” high)
- Negative momentum divergence
- Retracement or “sell-off” against the new (weak) high
One could also add Negative Breadth and Volume Divergences along with the 3/10 Momentum Oscillator.
In each even from July 2013 to January 2014, price retraced in a sell-swing down against the new “retest” high.
Friday saw an incremental new “all time” high for the S&P 500 ahead of an intraday reversal that carried forth with additional selling today (Monday, March 24).
After each yellow highlighted “Failure Test” pattern, I also included the red highlighted “sell swing” or retracement against the uptrend.
With the exception of January 2014, price completed a shallow but stable retracement down toward – or just under – the rising 50 day EMA.
For now, we’ll continue to focus our attention on the 1,875/1,880 pivot high and potential for yet another possible repeat outcome from the “Weak New High” or Failure Test pattern that developed three times recently on the Daily Chart.
For more daily updates from Corey, visit his blog at Afraid to Trade.com.