SPY Bearish Divergences w/ Potential Triple Top$SPY S&P500 ETF. SPY is currently hesitating near all-time highs which has led to a potential bearish triple top formation(upper red arrows) on the daily chart. As price has stayed relatively the same since early November, the lower indicators have all been declining(lower red arrows) which has created a bearish divergence. The lower indicators all show that the internals behind the recent rally in price from October to November have weakened, but have not flipped bearish yet.
The PPO indicator shows the green PPO line trending below the purple signal line. This indicates a short-term loss of upward momentum in price. This indicator isn’t considered bearish until both the green and purple lines are below the 0 level. What we would need to see going forward in order for price to continue moving higher is for the green line to cross back above the purple and for both to continue moving higher.
The ADX indicator shows the green DI and purple DI lines overlapping which means that the short-term trend in price has flatlined. When the green line is above the purple line the short-term trend in price is up, and when the purple line is above the green line the short-term trend is down. The histogram behind the DI lines is declining which indicates weakening trend strength. What we want to see here is for the green DI line to cross back above the purple DI line, and then for the histogram to begin rising which would indicate a short-term bull trend with increasing strength.
The TDI indicator shows the green RSI line rolling over after finding resistance at the horizontal 60 level and the middle of the RSI Bollinger Bands. The intermediate momentum behind price can be considered bullish based on the fact that the RSI is above the horizontal 50 level and so is the center of the BBands. When both are below the 50 level the short and intermediate momentum in price can be considered bearish. What we want to see in this indicator is for the green RSI line to cross above the center of the BBands and then rise above the 60 level to give us a strong indication that the short-term and intermediate-term momentum behind price is bullish.
Worth noting is that as price rose this week, volume declined. This indicates that less traders were in the market moving price back up to test the all-time high near $470 after the previous double top.
Should price continue to hesitate and rollover over from here, local lows can be looked at for potential levels of support. The two most recent local lows to watch are at $450 and $425, those were the last two levels of demand prior to new all-time highs being made. If the market is still mostly bullish, those two levels will hold, with $425 being the critical level.
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