Wednesday, March 5, 2014

SPX Daily Chart New All-Time Highs Overbot Negative Divergence Developing Expansion Pattern

The SPX prints a new all-time intraday high at 1876.23 and new all-time closing high at 1873.91. The big down day on Monday is followed by a strong up day on Tuesday. The small blue circles show the all-time high that printed to end 2013, then the new all-time high in mid-January, only by a couple pennies higher, and now the new all-time high. The 1880's are important since 8's typically lead to 2's. A close or closes above 1880 would hint at 1920's. The 1878 would lead to 1882. The upper standard deviation band is 1890-ish so this 1874-1890 area is important. Equities either top out now and roll over to the downside or 1900+ will be coming.

The brown lines show the expansion pattern where price has now come up to tag the upper trend line. The expansion pattern is also called a megaphone pattern for obvious reasons. The handle is added to the megaphone to highlight the pattern. The megaphone now shouts that price is at the top rail and should head downwards towards the bottom rail at 1700 as the coming weeks and months play out.

The red lines show the negative divergence in play in the short term for the histogram, stochastics and money flow, and also over the multi-month time frame for all indicators. In the near-term, the MACD line is long and strong and RSI is sneaking higher. RSI is not overbot, but has been in previous months, so this leaves the door open for more price upside as the RSI seeks the 70%+ level. Stochastics and money flow are overbot. The volume shows far more interest in selling than buying. The upside market orgy yesterday was on below average volume.

The projection is for price to top out at any time in the days forward and begin a new down leg for the weeks and months ahead. Due to yesterdays momentum, a move sideways for a week or so is not unreasonable to allow time to burn off the upside energy. 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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