SPX Daily Chart Tight Bands Signal Big Move Imminent

It's all on the line this week, a bull-bear cage match. Two enter but only one will exit. The tight pink standard deviation bands are tight, ready to squeeze out a huge move which is going to leave one side throwing confetti and the other seeking a watering hole to drown their sorrow. In recent memory, the bulls always win these tight band contests. The September 2012 move saw a 75-point spike in the SPX, which actually created the Fall 2012 top, however, many bears were likely forced to cover and then watched as the markets finally rolled over in October. The April 2013 behavior was the same. The tight bands squeeze a vertical move of 50 or 60 handles that created the April top.

At this juncture, the 4-1/2 year rally is the fifth longest in the history of the markets and very long in the tooth. If the sharp squeeze move is down, it would be a long time in coming and fully needed at this point. If the squeeze move is up, the two prior examples say a 50 to 75-point run-up may occur, which will then likely create the market top. The middle band is also the 20-day MA at 1691.74 so pay close attention to this number. Bulls win above 1692. Bears win below 1692. This time next week, it is very likely that the SPX will either be at 1750-ish, or 1630-ish. It is time for markets to make a decision and escape this one-month 1672-1710 sideways range.

The overbot conditions, rising wedge and negative divergence created the spank down in mid-July and the smack down last week. The indicators are negatively diverged across all indicators. Coupled with the universal negative divergence on the weekly chart is an ominous signal. Note that the indicators above are also weak and bleak now printing lower lows so even if price bounces, the indicators all want to see lower prices ahead. Price is extended above the moving average ribbon wanting to revert to the mean like the weekly chart. The chart is very bear-favorable but if Chairman Bernanke grabs a microphone and yells 'QE' then markets will go up.  Projection is for the tight bands to resolve to the downside to honor the technical set up and move sideways to sideways lower for the days, weeks and months ahead. 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.