Monday, May 27, 2013

SPX Weekly Chart Upward-Sloping Channel Overbot Rising Wedge Negative Divergence

The market bears had the stars aligned in April with price at the top rail of the red channel throwing off negative divergence.  The selling started with a high volume push lower but the Fed and BOJ easy money proves too powerful.  Markets reversed mid-April and catapulted into a parabolic 4-week upside orgy move. The action over the last month produces the rising red wedge and continued negative divergence for the MACD histogram, stochastics and money flow. In addition, the two-year negative divergence remains in place for the weekly chart. The RSI prints the same number at 75-ish as compared to the February 2011 price high, however, the SPX is 200 handles higher. In a strong upward market the RSI needs to print higher highs such as March 2012 to September 2012 to March 2013. There is momentum in the RSI and MACD line so the bulls can muster up another price move higher to perhaps form an M top for the broad indexes.

The month of May has four days remaining and started at the critical 1597-1598 S/R (1597.57) that has yet to be back kissed. The action on Tuesday and Wednesday is key to determine if the bears are going to make a run lower to log a negative month, or not. Obviously, the bulls remain in good shape elevated above the channel. The 1597-1598 support is also where the last large volume week occurred so it is prudent for price to return there to print a new volume candle and see if the bulls or bears are stronger. If the bulls push flat or higher into the EOM on Friday, the test of 1597-1598 should occur in June.  Projection is sideways to sideways lower as the weeks move along. This information is for educational and entertainment purposes only.  Do not invest based on anything you read or view here.  Consult your financial advisor before making any investment decision.

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