Thursday, December 19, 2013

SPX Weekly Chart Overbot Negative Divergence Price Extended

Nothing has changed on the weekly. Price comes up for a matching and higher closing high and the indicators are clearly negatively diverged across the board. There is no strength or desire by the indicators to see price move higher. Watch the blue lines in the right margin to determine if the neggie d remains in place if price continues higher. As long as the indicators stay below the blue lines, the market bears are fine and equities should roll back over to the downside in the days or week or two ahead. This analysis says Bah! Humbug! to the Santa Claus rally.

The pink dots show the price extension above the moving averages so, like always, price will revert to the mean. Keystone's 80/20 guideline says 8's typically lead to 2's, so 1780+ opened the door to 1820+. The 1808 would lead to 1812. 1818 would lead to 1822. However, a downside move would be expected at any time. The charts are played out ready to roll over. The Fed cannot save the day this time since they just used their ammo yesterday to bring prices to the matching highs. This leaves the BOJ that may announce more stimulus tomorrow morning which would add upside oomph to equities. However, the dollar/yen has already ran this week with traders sniffing this move out ahead of time, so it may be a sell the news event (and a stronger yen and lower dollar/yen results).

Thus, generally, the charts are topped out as well as other technical indications, the Fed already folded the tent and went home for the holidays, and the BOJ Banzai pump may be baked into the gingerbread already. In addition, and most importantly from a contrarian angle, no one expects a sell off, especially with Santy on the way.  There are no bears remaining, the last bear left town this morning on the Greyhound bus. Projection is sideways to sideways down moving forward for the weeks ahead. Watch your wallet. 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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