Tuesday, December 24, 2013

SPX 2-Hour Chart Megaphone Expansion Pattern Overbot Rising Wedge Negative Divergence

Here's an update on the 2-hour negative divergence drama. The MACD line is the focus. See how it continues higher even though it is already elevated? It wants to squeeze out some more upside juice. Note the money flow today printed a higher high (short green bar) so that wants price to come up for another high, which price did, so the money flow is negatively diverged again and is back on the bear side. RSI tried to print another high as well but only managed a matching high so this remains negatively diverged. Price needs another jog, down, up, then down, to turn the MACD line to a negative slope and start the move lower in price.

Histogram and stochastics clearly say a down move is wanted now forward. The price pattern moves through the megaphone pattern, an expansion pattern. The blue dots show the expansion in price. The SPX continues the upside orgy up through the top rail of the megaphone this week but much of that is joyous holiday seasonality. The thin blue trend lines can be monitored as well for the expansion pattern. The expectation would be for price to drop and move towards the lower rail of the megaphone. Projection is for price to roll over as the MACD line rolls over, say 2 to 6 hours forward, say, in Thursday's trading session. Then the bears will get a turn and try to push lower to the 1760-1780 target. December started at 1805-1806 so pay attention to this level with only 4 trading days remaining in the month.

The Santa Claus rally is now expected to carry markets higher into the new year so it would appear in jeopardy with the chart above. The Fed may have to pump more, or the BOJ, or perhaps a couple of blue chips will announce further buy backs, to keep the upside party going. Barring that, the technicals will take over and send the SPX lower in this hourly time frame. 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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