Tuesday, June 25, 2013

SPX Weekly Chart Channel Failure MACD Negative Cross

The weekly chart shows the various upward-sloping blue channels over the last couple years. For the move upwards this year, price failed the thin blue trend line a couple weeks ago at 1640-ish, then failed the thicker blue trend line identifying the bottom rail of the channel this week at 1590-ish.  A back kiss to the lower trend line at 1600-ish would be in order since this trend line has held for 8 months and must be shown respect. If price comes back up for the back test at 1600-ish, the bounce or die scenario occurs where price will either move back up inside the safety of the channel and head higher again, or, collapse which will direct price to the low 1500's.

The red lines show the rising wedge for price and negative divergence for the indicators, as well as overbot conditions, all of which created the smack down off the top. All the indicators remain weak and bleak wanting to see lower lows in price as the weeks play out although money flow is showing a tinge of positive divergence that may enable the back kiss of 1600-ish to occur this week or next. Watch the 50% levels for the indicators. Stochastics are under 50% signaling bearishness ahead while the RSI and money flow are hanging on by a thread. If RSI and money flow lose the 50% level, that will ensure further market downside ahead.

We have highlighted the MACD cross in recent posts. The MACD line (black) stabs down through the smoothing line (blue) as shown by the thick maroon circles. This cross occurred prior to the August 2011 waterfall crash, the May 2012 sell off, the October 2012 sell off, and now, obviously an ominous signal moving forward. Markets may bounce for a week or two, especially considering the EOQ window dressing, new money for the month of July, and the Independence Day holiday on tap, but the weekly chart is pointing to lower numbers for the broad markets as the weeks play out. 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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