SPX monthly buyers exhaustion candle?

Last week we identified a weekly “buyer exhaustion candle” on the SPX (see also here), which was the correct interpretation: one is wrong till proven right.

With the month of April in the books, let’s take a look at this month’s candle (far right): we see again a possible buyer exhaustion candle (upper wig longer than body) or it can be interpreted as a possible spinning top formation (After a long advance or long white candlestick, a spinning top indicates weakness among the bulls and a potential change or interruption in trend.). Like the weekly candle (which is red for the past week), we now need to see a red monthly candle: “sell in May?” to confirm the candle stick pattern.

spx monthly

That’s all there is to it for this month’s candle stick pattern (please note the COMPQ ended April already red) and the month of May will be be crucial to see bearish follow through or not. The Coppock curve below the price chart may help us to find further evidence of a new bull or not.

Namely, the Coppock curve signal is very simple. Coppock used monthly data to identify buying opportunities when the indicator moved from negative territory to positive territory. Read more here. According to Mr. Coppock, that’s all the indicator is good for. Recently, analysts have started to look at when the curve starts to move back up from below zero levels; i.e. when it stops declining when below 0 and starts increasing, as an earlier indicator of a new bull market. Using data since 1980 we can identify 8 such occasions, with only 1 giving a falls signal (not shown here).

Zooming in we observe that the monthly Coppock curve is below 0 on the SPX and is still decreasing: no long term buy signal. Can this signal change next month? Absolutely it can. We certainly can get a buy signal (on all major indices) next month. But, we have no buy signal now, and that’s all we can work with. In addition, the monthly candle stick pattern suggesting the “Sell in May” set up, would also mean there will not be a long term buy signal this coming month either, putting the hopeful bulls under even further pressure.

This is an excerpt of this week’s digest available to premium members only.

As you notice, Intelligent Investing tracks many lines of evidence to determine the market’s next big move, Elliot Wave, S/R, TIs and TAs are several of them. Holistic objective analysis allows us to be on the right side of the market more often than not, without any preconceived notion or opinion. We use just the facts. Just like we did here! Do you want to be on the right side too? Of course! Then please join us here.

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