Monday, December 2, 2013

SPX Monthly Chart Overbot Rising Wedge Negative Divergence

The bulls keep running higher fueled by the Fed and BOJ easy money. The monthly charts receive a new print last Friday. Note how the RSI squeezed out a slightly higher high as compared to 3 months ago. The MACD line is also showing long and strong behavior. The remainder of the chart says down. Negative divergence exists across all indicators comparing the current top to the 2007 top, sans the MACD line. The shorter term behavior is also negatively diverged except for the RSI and MACD line mentioned. This behavior hints at a jog move to top the markets off. The red rising wedge, overbot stochastics and elevated MACD are all negatives. Note the cheesy bottom in 2009 that did not occur due to positive divergence (except for money flow) but instead due to the Fed refusing to allow capitalism to do its work announcing QE1 for the sole purpose to save the stock market. This leaves unfinished business for some point in the future. The Fed has pumped the stock market for nearly 5 years. This 4-1/2 year plus rally is one of the longest in stock market history.

The last couple months push higher is a result of the Yellen dove rally as she skates through the nomination as the new Fed Chief. Then 2 or 3 Fed members walk to the microphones on a daily basis making dovish comments to further pump the stock market. Then, to complete the trifecta, the BOJ is bludgeoning the yen again, sending the dollar/yen up through 100, 101, 102 and today moving towards 103. The weaker yen keeps the Japan and U.S. stock markets elevated. Moving forward, a market top would be expected with a potential jog move ahead; down for December, then back up in January and then roll over to the downside creating a market top moving forward. This action would allow the RSI and MACD line to negatively diverge in the short term and lock in the downside moving forward. This timing would also coincide with the potential for QE tapering to begin in early 2014. 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.

No comments:

Post a Comment

Note: Only a member of this blog may post a comment.