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Potentially larger than usual move coming up in SPX

Discussion in 'Technical Analysis' started by GreenZone, Feb 4, 2016.

  1. GreenZone

    GreenZone Well-Known Member

    The SPX daily chart is now in the 2nd day of a squeeze.
    This is defined as when the Bollinger Bands are contained within the Keltner channel.
    In simple terms, it means that you have compression......which leads to expansion.
    So we are currently winding up for a potentially big move.

    SPX-squeeze.jpg

    The question is which way will it fire?
    It's hard to say at the moment, since we appear to be in a sideways chop.....but I'm leaning slightly more to the bearish side, considering everything that's going on with the world economies right now.
    My main intention of posting this is just to provide a heads-up for a potentially larger than usual move coming up in the coming week or so.
    Adjust your positions accordingly....
     
  2. GreenZone

    GreenZone Well-Known Member

    For those of you who follow Elliott Wave, the January move down could be considered either wave 1 or wave 3.
    If it was wave 1, then wave 3 down will be coming up next, and wave 3 tends to be the largest wave out of the standard 5 waves.
    That would be bad.....
    If the January move down was wave 3, then wave 5 will be coming up next, and this will typically be smaller than wave 3 (normally some fib ratio of wave 3 such as 61.8% or 50% or 38.2%).
     
  3. Trader G

    Trader G Well-Known Member

    I like the TTM squeeze indicator which is very similar. My thinking is that because the recent move down was so large, it is going to take some time for the indicators to catch up. In other words, it is showing the squeeze because the market movement is getting back to normal. I have seen this with some of the other volatility based indicators I look at (starc bands, bollinger bands, etc.) I could be completely wrong in my thinking.
     
  4. GreenZone

    GreenZone Well-Known Member

    No, you're not wrong in your thinking.....but we are both saying the same thing.
    Expansion leads to contraction, which then leads to expansion.
    It's a cycle.

    So, yes, we had a big move down in January, and we are now consolidating.
    This is winding up the coil for the next big push in one direction or the other.

    The squeeze signal doesn't always work out that great in SPX, in terms of resulting in a big move.....but notice that the huge drop in August 2015 had a 3 day squeeze which then fired to the downside.
    squeeze-Aug.jpg
     
    us271782 likes this.

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