Is SPX overbought?The key point of this analysis is the strong pivot level on $SPX around the price range of 4100-4150. This area has acted as support and resistance several times this year, which is confirmed by being the area with highest volume on a volume histogram for 50 days, and a volume histogram for 200 days.
Bearish Signals :
Since prices are coming from beneath, this pivot level is likely to act as a resistance level, preventing the S&P from rallying further up.
The 20-14 period regression channel indicator still gives a bearish signal for trend, and the S&P is trading below its SMA 300 (the thick red line)
My RMA indicator shows that there were two days when the stock was oversold recently
According to CBOE, on September 9th the SPX put/call ratio was 1.36, which means there's more puts than calls
Bullish Signals :
From a trend channel perspective, $SPX is currently following a descending broadening wedge pattern, which is generally seen as a bullish signal
There was recently strong momentum, with two gaps, so a breakout could happen out of the trend channel, which would be very bullish.
Overall, it seems more likely to me that this is a bull trap than a bear trap, which will move into a resistance level then reverse down, so I will continue shorting at the current price, but if the price continues to rally to above around 4170, then I will reverse my position into a long, as a breakout could easily pop towards the upside given the strong short term momentum.
