Thursday, January 2, 2014

SPX Monthly Chart Overbot Rising Wedge Negative Divergence Developing Price Extended

The monthly chart had been set up for the bears but the obscene power of the Fed and BOJ is relentless and the rally over the last 4 months creates some long and strong behavior (green lines). The monthly charts receive a final print for December and another up month is logged. Equities are expected to sell off but the long and strong behavior will want to see price come up one more time perhaps about 4 or 5 months from now, in the April-May time frame, interestingly when the BOJ will likely attempt 'shock and awe redux'. The BOJ murdered the yen in April 2013 (big up in dollar/yen currency pair well over 100) which created the large upside in US and Japan stocks as well as European stock and bond markets in 2013.

The fractal from the 2007 top may repeat here forward with the first peak of an M Top occurring now, with a substantial drop of 100 to 200 handles, but then a wild vertical recovery spike higher above 1800 again, then the more permanent roll over. The SPX market highs that are anticipated in the days ahead may mark THE top with these numbers holding for months and years forward. The pink dots show how price is extended above the moving averages. Note in the late summer of 2007 before the October 2007 top, price dropped to test the 20-week MA and bounced. If the fractal behavior repeats, the SPX is anticipated to drop to 1650-1750 in February-March where the wild recovery spike would occur back to 1800 or higher. Note that the 20-week MA will likely be around 1600-ish when February-March rolls around.

The SPX weekly chart has been highlighted the last couple weeks or so noting how firm negative divergence is remaining across all indicators. This sets up the SPX to drop now, or starting this month. Then the near term long and strong behavior shown above can be resolved once price comes back up for the potential M Top. Bears are favored to begin the new year despite the vertical euphoric move in the SPX over the last few months. 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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