SPX Monthly Chart Negative Divergence Upper Band Violation Fibonacci Retracements

January finally prints a down month after the 5-month orgy move higher due to the weaker yen. The red lines show the negative divergence for the 2007 and current tops. The pesky RSI and MACD line maintained a long and strong profile sending price higher but now they are petering out and rolling over. The market top prints with negative divergence but typically it is much more pronounced. The RSI prints the higher high coinciding with the top so the door is left slightly ajar to bring price back up well up into the 1800's again to print near or above the all-time highs. At the same time that would simply confirm strong negative divergence and likely confirm a multi-year top.

The projection from December was for a market selloff in January perhaps into February, or even March, which occurred so far, then a recovery move higher above 1800 again, then another top, then rolling over confirming that a multi-year top is in place; an M top or double-top type pattern. The upper standard deviation line is violated for the last year and price needs to visit the middle band, at 1593 moving higher, at a minimum, to show respect. The blue dots show that price has never gone further than a period of 13 to 17 months without at least coming back to the vicinity of the middle band which is also the 20-week MA. Thus, the last near touch was late 2012, 15 to 16 months ago in this critical range where a price move down to the middle band should have occurred or is about to occur.

The Fibonacci retracements are shown with the first 32% retracement for the long rally from 2009 through 2013 at the 1400-ish level, about 375 handles lower. Many times price will not only retrace to the center band but also the lower band and note how the lower band is moving up and will form a confluence at 1400-ish in the spring, summer and autumn this year. Perhaps this is the destination for price this year. Although it may seem like a drastic move lower, so was a +30% upside year last year. To return more near term, price desperately needs to move lower to the vicinity of the middle band at 1600-ish over the next 1 to 3 months, say at least to 1620-1630 where that strong support is (thin brown line).

So right now it remains a mystery as to whether we keep selling off into the 1600's, then recover to 1800-ish, then roll over, or, bounce now, perhaps helped by the BOJ yelling Banzai! at their 2-day meeting 2/17/14 and 2/18/14 only about one week away, to come back up over 1800 and then roll over to the downside. Overall, sideways to sideways lower prices are expected moving through 2014. 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.