Finally

The markets finally broke out of their consolidation ranges today.
Here is an updated chart from one posted a few days ago showing the daily chart setting up the 2c-2d criteria.  To reiterate; 2c-2d criteria we want to see:
a). Trend on the traded time frame
b). 3-pushes to a low or inverse H&S on the trigger time frame which is often the 3d criteria

Same goes for the rest of them.
DIA

QQQ

and the harbinger, IWM - this one you had to look a little deeper to find the 3d setup (it happened on the 60-min chart, see below)

65-min chart on right

repeat

The SPY has been repeating a similar cycle for the past two weeks.
Following a short squeeze type of rally, price has then rolled over in an XYZ corrective wave.
The 3/10macd 3a criteria describes price as testing resistance.  Should resistance break and price goes higher the fast line shows greater momentum and the slow line is often pulled positive.  This behavior can often begin a new trend.  However, rather then a trend developing, what we have seen is price being sold and correcting most/all of the previous gains.
Here are two looks at what I'm talking about, the latter just highlighting the XYZ waves

A broader look in the chart below; we haven't gone very far, but there are clear areas to watch

GLD...finally

It took over four months, but Gold finally made a decisive move this month.
I've mentioned before GLD and the higher time frame 2c-2d criteria setting up (monthly/weekly charts).
So, what you're looking for:
- Strong trend on the higher time frame (indicated by the slope and distance between the two moving averages).
- On the faster time frame (weekly in this case) you're looking for the 3d criteria, which often shows itself in the form of 3-pushes to a low or an inverse Head & Shoulders.  The actual trigger bar occurred last week with the strong momentum bar breaking out from the Fib. fan (you could just as easily draw a neckline however you choose.

The immediate hurdle to digest is a small overhead gap between $165.33-$166.  While the $172 area likely presents the most formidable resistance point.  The overall objective with a setup such as this is a continuation of the predominant trend.  So, essentially we'd like to see new highs over the next few months.
An important characteristic to watch is what happens with the fast line on the monthly chart going forward (which is just an indication of the strength of momentum).  This development will be hinted at on the weekly chart, where we would like to see solid trend development, rather than being confined to this long-term consolidation.

8_31_SPY_playback

A playback of the SPY today, Friday August 31.  Jackson Hole symposium as well as end-of-month.  Horizontal lines on the chart indicate the following:
Dotted Fuchsia = IB_high/low  Solid Blue = o/s_high/low
Dotted Black = today's Open  Solid Purple = o/n_high/low
Fib projections based on overnight high/low range.
Click in lower right to enlarge full-screen.

testing lower

The SPY is testing lower and possibly going into the "C"  point of an ABC correction.  The daily 3/10 macd is oriented in the 2c-2d configuration (bullish trend, where we look for an inverse H&S, 3-pushes to a low, or an otherwise higher low seed wave), which I've mentioned before puts one on the lookout for a 3d setup on the faster time frame.  We did see the 3d setting up on the faster time frame in the chart below, however price rolled over.
Highlighted below, in the 130m chart, we see the same pattern as what looks to be taking place on the higher time frame daily chart.  So, the next bounce from support could take us back to $142 over time (which is strong resistance).  If the 3/10macd doesn't indicate very strong positive momentum going forward things can set up a 2b bearish criteria.

replay

I've been trying to get the dimensions and resolution right for a video playback, so this is just a test.  Click in lower right corner to view full screen.  Let me know if you have any suggestions regarding playback; too slow?  Needs music?  Draw on the charts as it's being played back?
Here is a key to what the horizontal lines represent:

pitchfork

A modified Schiff pitchfork on the SPY; price pulling back right to the mid-line.

SPY replay

Here is a 5-min chart of the SPY with TICK.

Here is a key for the above charts so you know what the lines and dots represent:

The numbers are there to highlight the following:

1). An attempted break from the opening swing on very marginal TICK.

2). Higher TICK high, lower price highs (reverse div.).

3). A test of the overnight lows which occurs on a positive TICK divergence.

4). Higher TICK highs on the re-test of previous selling point, but notice how price stabilizes as TICK pulls back to the zero-line.

5).  Higher price highs (to a 25% projection of the overnight range) on lower TICK highs (negative divergence).  

some charts

Choppy end-of-month (and pre-holiday) price behavior.  So here are a few charts.
First, a weekly of the SPY showing that we're essentially rotating inside the real-body of the previous week's high-wave doji.

Seeing an inverse H&S (which is what the 3d setup often highlights) on the higher time frame with over $142 being the actionable neckline.

Finally, a look at the 20-day percentage performance of the sector-ETF's; XLK & XLY continue to hold up well.

previous setups

Wanted to just post a couple setup examples that occurred the previous two sessions in the SPY.
From Friday:
  3-pushes to a low.  Multiple positive divergence, the last one being a 3d setup (there's also a 4d-4c continuation flag setup on the 23rd)

The next day (Monday) was followed by a 2c/2d setup (with a very late triggered entry) that failed to break through resistance.  Later in the day there was a short opportunity in the form of a 2d-2c bearish continuation

resistance

An update on this weekly chart of the SPY.  Some hesitation (high wave candlestick) going into that resistance zone overhead.  Above $143 has a lot of clear air until the next supply level around $147.  Next week is shortened (Labor Day) so it's possible we get a move that sets up next week's action but also leaves Friday's trade as consolidative in nature.

divergence

Just because there exists a divergence doesn't mean price can't continue higher.  A perfect example of that today in the SPY and the NYSE TICK.
Sorry for the busy chart.  As an aside,  the first highlighted region on the TICK chart was not a divergence.  What followed, were TICK divergences, which led to subtle price pullbacks but ultimately continued breaking out.  Notice how TICK held the zero-line on each pullback.

trend

A look at the recent trend development in the SPY.  When in a trend (as defined by the Moving Averages you like to use) we can look to buy the pullbacks that I label as 2c-2d criteria.  There are also Fibonacci price projections plotted on the 60min chart (left) to give a guideline for targets.
On the faster time frame (right) you're looking for a 3d setup or fast line pullback into a positive sloping slow line which often takes on the characteristics of an inverse H&S or a 3-push pattern.
The highlighted regions are to show 50 & 100% projections, but also price holding a 50% retracement of the initial impulse move.

The air is looking mighty thin up here.  SPY first tag of $143 since May of 2008

day after trend

The day following a trend day typically spends a lot of time (if not all day) within the previous day's upper range (typically the top third of the previous day's range).   It is often not a day to expect much from counter-trend moves and also an environment best left for scalping.

Keep in mind: the sub-chart of the TICK has a number of horizontal lines; zero-line being teal colored, + & - 500 = neutral zone green or red dash lines, + & - 800 = general bullish/bearish are solid green or red, and + & - 1000 = extreme bullish/bearish are a green or red horizontal line.
Notice that today's TICK only got down to barely -500 which is very bullish.

Below is a chart of the SPY with TICK, the numbers 1-5 indicating setups one might look for:
1). The first higher low which followed a new TICK low, notice the strength of the green bar which cemented the higher low.
2).  Profit taking at resistance on a negative TICK divergence.  Notice the lower wick on the red bar under the "#2" indicating the profit taking sellers which follow this methodology.
3).  Price tests support on a new TICK low which is faded.
4).  Price re-tests resistance and breaks out,  but on a negative TICK divergence (harami reversal bar).
5).  Price tests support on lower TICK lows (reverse divergence), the strong reversal bar which followed giving a strong follow-through move in the last 15-30 minutes back to the Open price on a new TICK high (wherein profits were taken into the close, as is evident by the long selling wick on the last 5-min bar).

Fri 8_17

Coming into the supply point which began the lower high sell-off in May of '08.  This thing could. go. all. the. way!

SPY S_R

Updated from below with today's price action.  Strong bounce at the low volume node at the end of day to close on the same price as yesterday.

Below is the original chart i posted this morning:
Something I was working on for Support/Resistance levels going forward.

geometry of a reversal

This is one of the most prevalent reversal cycle structures in the market (at least that's how I feel).

and here's a look with today's @ES_F

and with volume

and 1 more chart with the main breakdown pivots

Mon 08_13

Just a chart of the SPY with overnight range (fuchsia) and opening swing (teal).

As an aside, here's a look at the recent SPY cycles.  Very symmetrical with the Regular and Inverted cycles being of nearly equal length (about 1 trading day as there are 26 15-min bars/day).  The coil continues.

into resistance

We're right into resistance; 1% from fresh post-Lehman highs and 10.5% from all-time highs on the SPY (weekly charts below).  We either get a strong momentum bar to breakout (getting very extended and compounding a short squeeze) or we fade to entice buyers.
There are often dual levels of resistance in these circumstances, coinciding with previous breakdown points.  Interestingly, the previous 2 breakout to new high attempts were faded for larger corrections.

We also appear to be forming smaller seed waves which kick off these measured moves to higher highs.  Below is a chart with Fibonacci projections based on the highlighted seed waves (7 of them):

The chart below adds in the 3 larger cycle moves (green) with red Fib. projections.  The $143-$146 area has a good deal of Fib. confluence:

 In the grand scheme of things, this monthly chart below we can see price has done a good job in filling in the previous momentum selling that began in June of '08.  Price could stand to test lower for constructive price discovery,  particularly given the importance of the overhead price levels which previously resulted in a double top.  Trends end in a climax, and in my opinion we haven't seen one yet.

At any rate, the longer we take to test the $154.50 area, the better for sustained trend development.  Keep an eye on the VIX  going forward, which hasn't given any hints at a correction, though is holding a higher low (weekly) while the S&P holds this current lower high.