Wednesday, July 2, 2014

SPX ready to correct and form a Left shoulder?

Yesterday SPX almost touched our target of 1980 ( SPX is getting overbought at daily and weekly timeframes (RSI>70) with negative divergence especially in daily RSI.

 VIX probably is forming a diamond reversal pattern, which means increased volatility for the next days-weeks, consistent with a deep correction.

We believe that SPX is almost ready for a substantial correction towards bellow 200 EMA(weekly) around 1750.

If this scenario finally plays out, 1980 will probably be the left shoulder of a huge Head and shoulders pattern for SPX.