Tuesday, February 11, 2014

SPX 2-Hour Chart

The 1-hour chart highlighted yesterday morning is now negatively diverged across all indicators. Trying to line up the hourly and minute charts in one direction can be like herding kittens. The 2-hour chart is negatively diverged across the histogram, stochastics and money flow but the RSI and MACD line desire another price high after a pull back. The chart above is similar to where the 1-hour chart was yesterday at this time. One to three candlesticks are needed to top price out and roll it over to the downside; about 2 to 6 hours trading time. Thus, the bulls may be able to keep price elevated today but by this afternoon and into tomorrow, a more substantive pull back would be anticipated.

Chair Yellen speaks for the first time as the new Fed head. Her testimony will cause markets to juke and jive before lunch time and markets will form an assessment of Yellen by the afternoon. The blue lines show the critical S/R levels at 1828, 1808-1809, 1802-1803, 1796, 1791, 1788, 1781 and 1772. Since the RSI and MACD line are providing a bit more upside juice, and the S&P futures are +7, check that, now +9, at this writing about 4-1/2 hours before the opening bell, a test of the critical 1808-1809 resistance appears to be on tap. If bulls punch up through 1808-1809, then an upside orgy will occur with price seeking 1828 in the days ahead. The bears must hold the line at 1808-1809, otherwise, they will fold like a cheap suit, and shorts will cover supplying further upside bull fuel. When equities head lower again in the days or weeks ahead, the 1772 level is the strongest support level in the entire 1700-1850 range. If/when 1772 fails, all hope will be lost for bulls since price will drop quickly to 1745 and then 1722, then 1700. As long as the bulls stay above 1772, they can float along with minimal damage this year.

The chart hints that the 1808-1809 resistance should hold. Of course, it depends on Yellen. Her statement is released early at 8:30 AM EST so monitor the futures at that time to see if any adjustment occurs. Traders appear to be thinking that dovish Yellen may taper the taper moving forward, due to weak jobs and economic data, so equities are moving higher. If she reinforces the current view about continued tapering at a pace of $10 billion per month (expected), or if she speaks more hawkishly, the markets will weaken.

It is a shame that fundamentals no longer matter since the markets are controlled by the central bankers, especially the ongoing collusion by the Fed and BOJ. Perhaps the so-called 'free markets' were never truly free anyways. The projection is for the 1808-1809 resistance to hold and for price to weaken moving forward for the days ahead. It all depends if Yellen will be yellin' Banzai! (directing the BOJ to weaken the yen), or not. This information is or 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.

Note Added 6:32 AM on 2/12/14: The SPX catapults higher on news that a debt ceiling limit resolution is reached. The House passes a clean bill that the Senate will bless so this potential market problem goes away and overshadows Chair Yellen's debut appearance. Both positive events create a double whammy of joy sending the SPX 20 handles higher to 1820. The HOD is 1824, which is resistance, and note the 1828 strong R in the above chart is now in play. Technically, the chart has to absorb the new news, and is in the same shape today as yesterday, so a topping out would be expected today or tomorrow and the 1824 and 1828 resistance levels should hold.

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