Posted on by ColinTwiggs

S&P 500 breakout

Narrow consolidation on the S&P 500 weekly chart and completion of a shallow correction on the Nasdaq 100 would suggest a strong up-trend.

The S&P 500 broke through resistance at 1875/1880, signaling an advance to 1950*. Layering above 1850 throughout March reflected strong selling, with bearish divergence on 21-day Twiggs Money Flow warning of medium-term selling pressure, but upward breakout indicates that buyers have prevailed. Reversal below 1875 is unlikely, but would warn of a bull trap — as would a peak below the descending trendline on Twiggs Money Flow.

S&P 500

* Target calculation: 1850 + ( 1850 – 1750 ) = 1950

CBOE Volatility Index (VIX) at 13 indicates low risk typical of a bull market.

VIX Index

The Nasdaq 100 found support at 3550 and the (secondary) ascending trendline. Recovery above 3700 would confirm another advance, but continued bearish divergence on 13-week Twiggs Money Flow would warn of persistent selling pressure.

Nasdaq 100

* Target calculation: 3750 + ( 3750 – 3550 ) = 3950

3 Replies to “S&P 500 breakout”

  1. Colin said…
    Layering above 1850 throughout March reflected strong selling, with bearish divergence on 21-day Twiggs Money Flow warning of medium-term selling pressure, but upward breakout indicates that buyers have prevailed.

    What’s the premise under which you say there was strong selling in March? Actual price action would argue there was even bullish/bearish behaviour. I guess what I’m asking is how do you calculate the Twiggs Money flow? What is it based on? Or is that a secret I have to pay for – sorry I don’t use IncreadibleCharts, I just read your blog from time to time.

    Cheers
    Ron

    1. Good question. The reason I say there was strong selling March is:

      1. Normally a breakout (above 1850) would be followed by a rally, or retracement then a rally, but here the index encountered resistance at 1880, with four successive retracements, that prevented the rally for an entire month.
      2. Bearish divergence on Twiggs Money Flow suggests a predominance of weak closes. You can find the formula for Twiggs Money Flow here.

      Volume on March 17,18 and 28th (blue candles) was noticeably weak, but the index held above 1840/1850, indicating the presence of buyers. This was a real arm-wrestle between buyers and sellers and I am not sure it is over. We are likely to see an advance over the next few weeks, but there is still a lot of negativity around and we need a good (+/-10%) correction in the next few months to restore confidence.

      1. OK – thanks for that – as always I appreciate your explanations and level headed comments. I am very grateful for the link to the Twiggs Money Flow explanation Colin, nice work. I’m also a fan of the Welles Wilder MAs, especially for use in ATR and RAD Chandelier.
        Thanks for your reply Colin
        Regards
        Ron

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