Steve is our newest Spiker. His presentation on Squash Bottoms received the top rating at the 2009 Spike Reunion.

Remember last Spring when we were waiting for an interim bottom? Bullish divergences were showing up but we kept getting false bottoms that led to whipsaw trades. Now it feels like we’re at a similar juncture, waiting for an interim top while the bearish divergence signals continue to become more evident. After observing the SPX then versus now, their similarity became apparent. Back then we had a triple bullish divergence, similar to the triple bearish divergence now. That was followed by an exhaustion move down which led to the current bull run. The divergence pattern seem to give an alert or warning of change, but the exhaustion move was the pivot point that led to a solid tradable run starting with an immediate explosive move.

Is the current SPX MACD-Histogram peak forming the last gasp before a significant drop? Could it be a pivot point?

This market is ruled by exhaustion moves, sometimes with an additional punch down – orchestrated by the market makers. Stocks get shorted like there is no tomorrow, down to support, pull up slightly, then they drop the bid and run the stops so the big boys can get shares on the cheap for the next leg up. This pattern provides a very profitable opportunity IF the impulse stays blue thru the retest as shown in these charts:

So if the inverse holds true in consideration of the SPX and this latest MACDH peak in fact develops into an exhaustion peak then we should see a subsequent retest of the high without the impulse going green, followed by a hard sustained drop?

Happy Thanksgiving,

Steve M.