Monday, January 6, 2014

SPX Daily Chart

The overbot conditions, rising wedge and negative divergence (red lines) created the spank down from the wedge. Price needed a mean reversion as the pink dots show.  The positive move, however, from 9 days ago to 6 days ago, resulting in the top, comes with RSI, MACD line and money flow squeezing out a tiny bit more of oomph for this 3-day period (short green lines). This hints that price may want to come back up for another look at 1840-1850 to properly set up for more extended downside ahead. As highlighted on this site over the last couple weeks, the SPX weekly chart is negatively diverged and wants to see weakness in stocks for January perhaps into February.

As discussed in the seasonality article this weekend, the period from 1/14 through 1/17, next week, is setting up very positively for the bulls, leading into the holiday weekend 1/18 through 1/20. Therefore, one potential outcome is weakness in equities this week, perhaps down to back kiss the 20-day MA at 1811.89, and rising, say 1810-1820, leading into a recovery move next week but the overall expectation is for price to continue rolling over to the downside moving forward through January and perhaps into February. If the SPX recovers this week and ventures higher to test the 1840-1850 zone again right away, this should set up the downside ahead despite the seasonality bullishness next week. 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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