Thursday, October 24, 2013

SPX Daily Chart Overbot Negative Divergence Gaps

The low CPC and CPCE put/call ratio charts on the weekend identify a significant market top currently in progress that is finishing up this week or next. Looking at the price action in the SPX, the red lines show negative divergence across the board which wants to create the smack down, sans the MACD line. The bears have the pesky MACD thorn in their sides since it wants to see another high in price. Note that the MACD line is negatively diverged across the three month time frame; it is only the VST (days) that hints at another test of the all-time highs at 1752-ish and 1759-ish. The volume yesterday was a hair under the buying volume the day before so this hints that price may want to test the upper side once more to lock in the neggie d for the MACD line.

If price does rise, watch the indicators to see if they maintain the negative divergence profile which will lock in the downside moving forward. The stochastics are overbot and clearly negatively diverged in all time frames now and the neggie d over the last 3 days causes the spank down in price off the top yesterday. Note the juicy gaps below at 1745, 1733-1737, 1656-1660 and 1640 which will need filled at some point. Key support is 1745, 1737, 1733, 1730, 1726, 1722, 1720, 1710, 1706 and 1697-1698. S&P futures are +6 at this writing about 5 hours before the opening bell which targets 1652 to begin the day.

Projection remains that a significant market top is now printing. The top may occur today, tomorrow, or next week, but very, very soon, within days. Cash is an attractive position nowadays and a lightening up on longs and preference for the short side is a prudent strategy going forward. The bulls may always have one last goose up their sleeves with an upside spurt but the charts show that we are very close to the top at this time.  The blue line in the margin shows a potential path forward with a test of the upper trend line that should lock in the MACD neggie d. The other potential path would simply be down from here. 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.

Note Added on 10/25/13 at 5:44 AM: The SPX teases the 1752-1754 area yesterday afternoon.

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