Friday, October 18, 2013

SPX Weekly Chart Rising Wedge Overbot Negative Divergence Nearing Upper Standard Deviation Band

The bulls continue running. Fed's Fisher, an avid hawk, now flaps dove wings. Traders are expecting the easy money QE crack cocaine to continue well into 2014. The markets recovered after the August 2011 waterfall crash and were on the way up in Fall 2011. Of course, the Fed and ECB central bankers were pumping the markets to create the recovery, which succeeded.  Equities ran into trouble during 2012. Note the indicators in overbot territory and throwing off negative divergence to create the September 2012 spank down, sans the RSI that wanted to see further highs. The Fed announced QE Infinity last Fall that created the thrust higher this year. Of more importance is the BOJ destroying the yen to pump their stock market higher which created an afterburner upside affect in the U.S. stock market.

Well, here we are. It's a nice view from the top of the mountain. Now what? The brown dots show price above the 20 MA above the 50 above the 200 which necessitates a mean reversion to the downside. The SPX prints a new all-time closing high at 1733.15 and new all-time intraday high at 1733.45. With the higher high in price, the indicators remain negatively diverged across the board, in the several month time frame. Also the shorter one month time frame shows the stochastics and money flow negatively diverged but the RSI, MACD line and histogram want to squeeze out a bit more of upside after a pull back may occur. The standard deviation bands show price nearing the upper band at 1743, only 10 handles away. The upper band on the daily chart was violated yesterday. Volume remains unimpressive.

Projection is sideways to sideways lower moving forward. This price action continues to hint that a multi-year long-term market top is being placed. The collapses out of rising wedges can be quite dramatic so if the 1680-1710 range fails, a quick move to the low 1600's would not be surprising. Since the RSI and MACD are trying to squeeze out a touch more juice, the SPX may play around at 1722-1745 for the next week then roll over. Then, or sooner. The central banker intervention is strong and powerful. 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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