Sunday, June 2, 2013

SPX Monthly Chart Rising Wedge Overbot Negative Divergence Reverse Fibonacci Sequence for Quantitative Easing Programs

May ends last Friday logging the seventh up month in a row. The power of central banker money is impressive.  All the moves higher off the 2009 bottom are the central bankers. The 13-month rally in 2009-2010 is QE1.  QE2 is the 8-month rally in 2010-2011. Operation Twist and the ECB's LTRO 1 and 2 pumped the markets for the 5-month rally from 2011 into early 2012.  Then who could forget Draghi's famous, or infamous, words last July that he will suppor the euro by all means necessary. This was followed up by the ECB's OMT announcement and the Fed pledging QE3 Infinity forever. This provides a 3-month pop into October 2012.  Then the Fed replaced Operation Twist with outright purchases in November-December 2012 with QE4 Infinity and Beyond. This creates a couple-month pop into February. Then the BOJ starts to hit the after burners on its yen debasement program. The yen collapses, dollar/yen sky rockets, and this easy money flows into U.S. and European equities and European bond markets, creating the new all-time highs in the U.S. indexes. The BOJ keeps the party going for another month into the April top. To place the cherry on top, the month of May turns out to be another bullish joy ride, reversing during the back half of the month.

What now?  First of all, note the time periods for each of the pumps described above starting with QE1; 13, 8, 5, 3, 2, 1, 0. This is a reverse Fibonacci sequence where time has ran out.  The QE's have less and less oomph over smaller periods of time as this global economic experiment plays out.  The red rising wedge, overbot conditions and negative divergence hint at a negative month or two ahead for June and July, however, note the pesky RSI and MACD line that show long and strong behavior over this three-month upside orgy period. This hints at an M top in summer time then roll over. As always, pay close attention to the 10 and 12 MA's since these are levels from where significant market damage and crashes occur. 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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