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05-27-14 SPX Daily Headline Chart

Prices extend higher after capture of “Bullish Trend Reversal Threshold”. Lack of validateing volume could be problematic.

05-27-14 SPX Daily Headline Chart

SPX extends higher to reinforce a short term "Bullish Trend Reversal" but declining volume fails to validated new highs. Although the end of the month normally favors Buyers, approaching overbought conditions and lack of confirming volume increases (Bearish) reversal risk. A healthy pause to digest gains is favored with any throwbacks to test lower support offering potential buying opportunities.

The current short/intermediate term ascending trendlines remain intact until violated with robust selling volume.

A closer look at SPY (S&P 500 SPDR) reveals a notable chart pattern developing:

SPY Daily Chart 5-27-14

Ascending Triangle pattern breakouts (higher) are prone to failure with greater than normal likelihood of throwbacks to test the triangle pattern's upper boundary. As prices are approaching overbought conditions, prudent traders should avoid chasing prices higher. It is advised to wait for an inevitable pause or better yet, a throwback to test support before considering any future long entries.

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