#20220831

Some random market thoughts, starting with S&P 500:

The study at the top of this chart is RSI(14), showing an overbought reading that coincided with the advance block candlestick pattern formed by the price action of 8/12, 8/15, and 8/16, all on a significant drop in volume (showing that buying interest was being exhausted).  Despite all Ichimoku signs having turned bullish on 8/12, what happened since then has shown that 8/16 was in fact a fairly significant top.

The gap down on 8/22 that pretty well cemented that top not only broke the support line of the previous month-long advance (dashed blue on the chart), but it also brought S&P 500 below its Ichimoku conversion line, which it had been above for the whole rally and now has stayed below ever since.  Additionally, all of the down days since that 8/16 top have produced higher volume than all of the up days.

It’s fair to ask if the current decline has run its course.  The volume spike of today’s session could be seen as climactic -- except that the last session of every month for the past few months has also produced a similar spike, so I hesitate to draw any conclusions from this one.  But as I type this, the E-mini futures are down another 0.6%, so I have to assume the decline is continuing until we see some evidence to the contrary in the price and/or volume.

One zone in which to look out for a bottom would be around the flat Ichimoku cloud bottom at 3907, which conveniently is not far below the traditional target for the presumed head-and-shoulders top formed by the price action in August.  (Edit: And it also lines up nicely with the shallow uptrend line formed from the bottoms in June and July!  If bulls want to prove that the June-August rally wasn’t just a bear market rally, holding this level would be well advised.)

As for myself, I went short in the middle of the long down day that was 8/26 and will probably be looking to take profits soon.

  And now for *sigh* silver...

(Please ignore all presumed wave counts on this chart, as they have clearly been invalidated.)

There is not much to say here.  I thought we finally had an impulsive rally up from 18.01, and yet here we are with still another new low.  But so far, this low has not been confirmed by RSI or MACD; add to that the yellow note on the chart, and we have the potential for a three-point divergence from the lows at 20.42, 18.01, and wherever the new bottom comes in.  That plus breaking out of the purple downtrend channel ought to form the basis for a decent rally if/when it happens.