Sunday, October 20, 2013

SPX 2-Hour Chart Rising Wedge Overbot Negative Divergence Potential Island Reversal

The SPX 2-hour chart is of interest the last few days, waiting for the negative divergence to confirm across all indicators and the RSI to reach overbot territory. The RSI is over 70% and overbot and now negatively diverged since the last two candlesticks show a higher high in price but the RSI is slipping lower. Note the doji candlestick for the last print which indicates a trend change at hand. Confirmation would be needed to the downside. The bulls continue to show strength with the long and strong MACD line, especially now taking out the high from one month ago. Momentum can be powerful and it typically needs a little time at the top to burn off all the energy. The other indicators are all negatively diverged and prefer to see price fall.

The brown rising wedge is near vertical. Traders never questioned that the political clowns would kick the can down the road, afterall, that is all they are good for, only caring about their next election rather than governing. That is why the markets were moving higher well before the political resolution was announced last Wednesday evening. Price violated the upper standard deviation line (pink) so a move back to the middle band, at 1719, would be expected, at a minimum. Strong support is at 1722 and also 1720 and since the middle band is moving upwards, the initial downside target is 1720-1722. Since the MACD line has more gusto, 2 or 3 candlesticks are once again needed to allow time for the MACD to negatively diverge to provide the downside go signal so this equates to 2 to 6 hours of trading, thus, sometime Monday.

Extending the time frame, the daily and weekly charts are set up or setting up with negative divergence but the momo is providing some additional juice as well so it may take a few days for markets to top out and the roll over to the downside for an extended period forward. The CPC and CPCE put/calls signal a significant market top at hand, and this would be expected to be printed this week or next. Thus, price may play around at 1720-1750 for the week ahead but time is running very very short. Price sits on an island now at 1737 and higher so an island reversal may occur where price leaks lower to 1737 and then collapses down to 1733 and lower in a heartbeat. Otherwise, price will simply track lower to fill the 1733-1737 gap. Projection is lower prices in this 2-hour time frame after the MACD cooperates with negative divergence. 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.

No comments:

Post a Comment

Note: Only a member of this blog may post a comment.