Tuesday, October 29, 2013

SPX Daily Chart Upward-Sloping Channel Upper Band Violation Overbot Rising Wedge Negative Divergence

The bulls keep pumping markets higher waving the QE flag. Consensus is that the Fed does not taper QE until March 2014, at the earliest, so it is party-time well into 2014. Traders are fearless without any worry buying stocks on any minor dip. Price is at the top rail of the blue channel. The SPX tagged its upper standard deviation band so a move back to the middle band at 1713 and lower band at 1646 is on the table. Note the prior tops. The 5/22/13 top occurred on the Fed announcement as price tagged the upper band and the Fed is on tap again tomorrow with the same set-up. Markets took 2 weeks to top in the back-half of July once the upper band was violated so a similar fractal may work out now with some additional marginal upside play on tap before the roll over to the downside. The Friday candlestick was a hanging man indicating potential trend change and needed follow-through yesterday to verify the change but, alas, for the bears, the SPX continued higher instead and prints a doji spinning top yesterday. This indicates a trend change but follow-through to the downside would be needed today to verify the change. The prior tops favored doji-style candlesticks to mark the roll over.

The SPX is overbot, although RSI is a touch short of 70%, and the indicators are universally negatively diverged across the one-month time frame. In the VST, the MACD line and money flow continue to show long and strong behavior wanting to see another price high after any pull back occurs. Thus, another jog move may be on tap for a couple-few days to allow the MACD line and money flow to create negative divergence. Equities will likely want to motor along sideways since we are at Fed Eve today. The Fed decision is only 11 trading hours away. No one expects the Fed to make any statement concerning the tapering of QE so the risks are obviously heavily-weighted to the downside. If Chairman Bernanke coughs and it sounds like he said taper, the markets would sell off strongly. The consensus is that the meeting will be uneventful and equities will float sideways to sideways higher.

The low CPC and CPCE put/call ratio's occurred about six trading days ago. This behavior typically identifies a market top within a couple weeks of so of time so each day forward may become more dramatic. 70% of the stocks are now overbot which is another indicator of a market top at hand. The evidence keeps mounting that equities are at a significant top right now, however, no one told the bulls that keep buying each day.  Projection is for the SPX to top out in the days ahead, at anytime, and move sideways to sideways lower going 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.

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