The mechanicals of today's day trade

I made a prediction last evening that S&P 500 would not hold high even if it’d initially go up due to the good jobs report. Well, it did broke down as expected after initially shooting up 10 points to reach as high as 2072. But it closed at 2055 today. When it went up to 2070, I decided to pull the trigger and held it all the way down to its lowest point. A nice same day profit at my last day on vacation in Panama.  Here is some mechanicals on the technical thoughts that made me confident on this trade. As shown below in the day chart of S&P 500, I saw two bearish technical setups that went against its uptrend:

• Even though it seemed to have a very strong up run during the first 1.5 hours (the upper yellow arrow), the momentum indicator (MACD) was always in a downward trend (the lower yellow arrow). This is technically called a negative divergence,  a good bearish indicator. It means MACD is going in a different direction from the underlying stock/index trend. When this occurs, it is often an early sign that the trend is going to change, either from up to down or vis verse.

• After S&P went all the way up to 2072, it started to decline and formed a text-book head and shoulders pattern, another very bearish sign. This often leads to a breakdown of the curve.

With these 2 technical indictors pointing toward a bearish trend for S&P, I was confident that I made a good day trade today. Thanks God, it was indeed a good call!

S&P 500 opened high and closed low, which was a quite bearish sign that it would likely be under pressure next Monday, barring any unexpected positive news to support it (remember we have 2 weekend days and anything could happen during that). If that’s indeed the case, I expect S&P may further go down towards low 2000s, e.g. 2010-2020. The good news is that it is less likely it will “crash” further. We are coming into a bull season in the next couple of months and likely S&P will start to move up, unless the EU mess really goes crazy.