Best Financial Markets Analysis Article The juxtaposition of the Bollinger Bands with the price structure has caught my attention ahead of the weekend. Let¹s notice that since Wednesday¹s peak at 1075.75, which reversed from just beneath the upper BB, the S&P 500 emini price declined directly towards the rising 20-day moving average, which represents the mid-point between the upper and lower BBnds. Within a bull trend accompanied by rising momentum (RSI), it is typical of a decline to hold in and around the 20 DMA and then turn to the upside to continue to higher-highs. Such was the case during April, May and then again from mid-July to the present.

Notice, however, what happened during the 4-week period between June 5 and July 8, when the emini S&P hit the top BB, reversed and plunged beneath the rising 20 DMA to the lower BB, accompanied by a falling momentum RSI gauge. The decline amounted to about a 9% correction. This week¹s downward reversal from the upper BB has plunged to test the rising 20 DMA so far. Given the sharply falling momentum RSI gauge, might the emini S&P and the S&P 500 Depository Receipts (SPY) for those following the ETF -- be vulnerable to downside continuation to test the lower BB, now 986? We shall find out very soon, but my work argues that just such a technical set-up is facing traders.

By Mike Paulenoff

Mike Paulenoff is author of the MPTrader.com (www.mptrader.com) , a real-time diary of Mike Paulenoff's trading ideas and technical chart analysis of

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