Sunday, January 19, 2014

SPX Daily Chart Overbot Rising Wedge Negative Divergence Price Extended Tight Bands Squeezing Out Big Move

Lots of ongoing drama with the daily. Note the tight standard deviation bands with the purple ovals. Tight bands squeeze out strong moves, in one direction of the other. The bulls received the nod in December and ran the SPX from 1770 to 1850, 80 handles, from that tight squeeze. The charts favor the bears but the central bankers keep pumping markets higher, destroying price discovery, at the same time fueling new asset bubbles in areas such as dividend stocks, high-yield instruments, and biotechs. The red lines show firm negative divergence in place wanting to see a move lower here forward. The stochastics reach overbot territory again but petered out with a matching high compared to a couple weeks ago and are rolling over again. Negative divergence on both weekly and daily charts, like now, for any index or stock results in doom and gloom and should never be faded.

The black rising wedge is another omen. The collapses from rising wedges can be quite dramatic. Stock is being distributed by the so-called smart money as evidenced by the volume candles. Stocks print a high for the day and retail investors get excited about the up day since it it hyped in the news. The funds dump shares to Joe Sucka (distribution) as seen by the heavier selling days following the bullish joy day. Ma and Pa Kettle always show up to hold the bag.

The brown lines highlight the major support and resistance at 1851, 1849, 1848, 1846, 1843, 1840, 1808, 1803, 1788 and 1781 (see the previous SPX S/R list). Note that there is a no mans land vibe between 1808 and 1840 and price sits at the top of this range to begin the new week. Failure from the current price may take the SPX down to the strong support and 50-day MA at 1807.57, in a heartbeat. Failure of the 50-day would send price towards the 1772-1788 zone. The 1832-1835 support zone is key. Price would not drop below here on Friday. This zone encompasses the 20-day MA at 1834.96. If 1832-1838 fails, 1808 is likely. The bears have it on a silver platter. The charts say the tight band squeeze should push price strongly lower. Projection is for sideways to sideways lower for the days and weeks ahead with potential for a sharp and quick drop occurring in the days ahead to start the festivities to the down side. 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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