Sunday, December 8, 2013

SPX Daily Chart Sideways Channel H&S

The overbot conditions, rising wedge and negative divergence created the initial spank down off the top as projected a week ago but the downside had no oomph and the happy Friday jobs report helped price recover to where it started the week. The sideways brown channel at 1782-1808 remains in play for over 3 weeks; you can also call it 1782-1814. Bulls win big above 1814. Bears win big sub 1782. The indicators are weak and bleak despite the happy move higher on Friday. Price bounced off the 20-day MA at 1792 so pay close attention to this number and use it as a bull-bear dividing line. Price came down to tag the middle band, which is the 20-day, and the a move to the lower band at 1768 remains on the table. The standard deviation lines are starting to tighten again so another large squeeze move is developing, up or down.

Price has not back tested the 200-day MA, now at 1657, and rising, for one year's time. This is unprecedented behavior and price will have to show the 200 respect at some point forward. Projection is for a market top and roll over to the downside to occur now which will target the 200-day MA in the weeks and months ahead. A move to 1660-ish is a -8.5% move lower from 1814. Price always overshoots so a pull back of -10% and more is not at all unreasonable. Long traders are not concerned about the downside at all currently as evidenced by the low volatility and low put/call ratios. Many will tolerate a -5% pull back without selling any stock but once the magical -5% is hit, the rats will start leaving the sinking ship which would usher in the stronger selling. A -5% move off the top is 91 handles a drop to 1723. The 1722 is very strong support, thus, the bulls may be able to keep markets elevated above 1722 with the continuing Fed and BOJ money-printing, but a drop below would likely usher in the much-awaited more serious market correction of -10% and more.

Keystone has been looking for a firm market top this year and is surprised at how new highs are printed as the year ends. A more typical 3 to 4 month rolling top was expected targeting the March-July time frame but the SPX is now 100 handles above the July-August top. All the pull backs were easy enough to call but none led to a more substantial downside and the 200-day MA remains elusive. The rally is purely liquidity-driven by the Fed and other central bankers and this is obvious with copper and commodities weak for months but equities do not care. Traders are complacent and worry-free since the Fed is dropping money from helicopters fixated on making the wealthy wealthier hoping it trickles down to the middle and lower class, which it is not. The money floods into dividend stocks, pumping this ongoing bubble, and also fuels buy-backs which is simply pumping stock prices higher allowing the rich to cash in huge gains as the poor folks struggle to find a job. The easy money sits on bank balance sheets otherwise, not going to loans as is intended, so the velocity of money is nill and QE is not helping, only digging the country into deeper debt with no benefit. The Fed knows this and probably threw a party at the Eccles Building this weekend after the happy jobs report since they realize they are out of ammo and any economic downturn would likely usher in the deflation and market mayhem that Chairman Bernanke has tried so hard to avoid.

The neon blue lines show an H&S pattern in play with head at 1814 and neck line at 1782 which targets 1750 if the 1782 fails. Interesting days are ahead. Projection is sideways to sideways lower moving 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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