Tuesday, December 24, 2013

SPX Weekly Chart Overbot Rising Wedge Negative Divergence

The SPX weekly was posted a week or two ago. The homework was to watch the brown lines in the right margin for the indicators to see if negative divergence remained as price made new highs. Price is now making new highs, now above 1833, and note that all indicators remain negatively diverged. The MACD line is trying to squeeze out more juice (pink circle) so watch that closely as the week finishes after Christmas tomorrow. The expectation is that the MACD line will not move higher and the SPX will move lower moving forward. If the MACD line squeezes out a move higher over the previous highs, another jog move would be needed, down, up, down, so about 3 weeks time, but the result is the same.

The chart is very bearish. Price is extended well above the moving averages requiring a mean reversion as well. Price will need to move lower for a back test of the 20-week MA now at 1738.41 and rising. The projection is for equities to start moving lower in the days ahead spoiling the Santa Claus rally. If the bulls keep squeezing out some further joy and come to the aid of Santa, the SPX will likely stumble sideways for a couple additional weeks and then roll over to the downside in early to mid-January. The expectation is lower prices for the weeks and months ahead. 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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