SPX 4H: Breadth Thrust & Key Weekly Level Signals
This is the 4 hours chart for the $S&P 500(.SPX)$ and the price action since April 24th, when the breadth thrust signal was triggered and I highlighted that new condition immediately in the paid subscribers chat that day.
The blue line represents the central weekly level (it’s one of seven modeled layers, but I’m only charting this key level to keep the visual clean). When the level is breached, there is a sell signal, when it is recovered, there is a bullish one (Always keeping some space below the level).
The visual speaks by itself: selling based on a daily or weekly candle alone can be a premature move, and shorting when the price is above the level can be even more risky.
There are weeks when the level is breached multiple times, but that does not change the power of using this insurance, and trading as any other career is about consistency instead of perfection.
That said, the Central Weekly Level, published every Friday for the week ahead, serves two primary functions: a reliable trigger and an effective signal filter.
1. High-Probability Trade Entry Signal (Trigger)
Bullish Entries (Buy Signals): When the price crosses and holds above the blue central level, it has consistently generated Buy signals, capturing the continuation of the underlying uptrend. It helps investors and traders buy the dip at a verified support level (after a pullback) rather than chasing the prior high.
Bearish Entries (Sell Signals): When the price crosses and holds below the blue central level, it has consistently generated Sell signals, capturing short-term pullbacks or significant reversals. It provides a defined exit or short entry point that capitalizes on a loss of weekly support.
2. Signal Validation and Avoidance of Invalidated Bearish Signals (Filter)
This level is crucial for filtering noise and validating the market’s true direction, specifically in avoiding premature or false bearish calls:
Validation of Bullish Strength: The level consistently acted as a dynamic support throughout the period. If the market pulled back but failed to significantly breach and hold below the Central Weekly Level, the underlying bullish trend was quickly reasserted (seen by the “Buy” signals immediately following a test). It confirms that a short-term pullback is only consolidation unless the level is broken.
Avoiding False Bearish Signals: By requiring a decisive breach of the Central Level to confirm a sustained downtrend or a deep correction, traders are prevented from falling for “invalidated bearish signals” (i.e., short-term weakness that doesn’t hold up). The level acts as the “line in the sand” that must be crossed for a bearish outlook to be technically justified. That said, it prevents aggressive short-selling during pullbacks that are destined to reverse higher, thus protecting capital by focusing only on verified technical breakdowns.
In short, the Central Weekly Level provides a clear, objective framework for trading the SPX, ensuring that decisions are tied to a significant shift in the weekly support structure, rather than temporary intra-week volatility.
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