Sunday, June 9, 2013

SPX Weekly Chart Rising Wedge Overbot Negative Divergence

Four years and three months is a long time for a market up move. Rallies tend to last 2 or 3 years. The rally from the Iraq War bottom in March 2003 to the market top in October 2007 developed in a similar manner, surprising many as the weeks went by with higher and higher highs lasting 4-1/2 years overall. The 2003-2007 rally was goosed by the housing and financial bubbles created by Chairman Greenspan's easy money policies. The current 2009-2013 rally is created by Chairman Bernanke's easy money policies (QE). In addition, other nations are in a race to debase their currencies with the BOJ easing creating the weaker yen and the new all-time highs in U.S. equity markets.

The red rising wedge is reaching an apex. Note that there is space at 1700 and a bit higher, call it 1730's for the absolute apex, however, the charts have finally developed universal negative divergence across all indicators. This behavior hints that the top is in. The 1680's are key. A test may occur but failure would be anticipated. Keystone's 80/20 rule says 8's lead to 2's so a close above 1680 would open the door to the 1720's. This scenario is not expected but if the BOJ or Fed says they installed several additional printing presses in the days ahead, that would supply the juice for the 1700 prints.

This is an interesting time for markets. The chart is set up for the bears moving forward and the drops out of rising wedges can be quite dramatic. For such a pattern, a trip to the 1400's would be expected without much effort at all once the wedge failure occurs at 1600-ish. The central bankers are the life line for the markets. Projection is for far lower stock prices as the weeks and months move forward. 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.

1 comment:

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