Stock Market Lull Before the Storm?

By: Mike_Paulenoff

From a big picture perspective, let's notice that both the upper and lower Bollinger Band lines are negatively sloped now, as is the 20-day moving average. This suggests strongly that the e-mini S&P 500 is in the grasp of a period of incomplete negative price action (a corrective period) that should retest and break below the April 10 low at 1352.50, on the way to a test of more important medium term support at 1338-1334.

When the 20 DMA rolls over into a pronounced negative slope, the index itself usually does not hit a significant reversal low unless and until it accelerates to the downside from the moving average by at least 6%-7%. In this case it would target a downside objective in the vicinity of 1307-1292 prior to sustained upside reversal action.

Although the e-SPM is barely down on the day, my near- and medium-term pattern work continue to warn me that this is the lull before the storm.

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By Mike Paulenoff

Mike Paulenoff is author of MPTrader.com (www.mptrader.com), a real-time diary of his technical analysis and trading alerts on ETFs covering metals, energy, equity indices, currencies, Treasuries, and specific industries and international regions.

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