Sunday, March 30, 2014

SPX Weekly Chart Overbot Rising Wedge Negative Divergence Standard Deviation Bands Tightening

Bulls and bears are fighting it out through the 1840-1880 range for the last couple months. You could have went on vacation and would not have missed a thing. March starting number is 1859.45 and there are only 6.5 hours of trading remaining in the month; EOM and EOQ1. Price will print a negative month unless the bulls come to play. The weekly chart is highlighted since late last year and the two negative divergence spank downs occur as forecasted. The stochastics are on the verge of coming off the overbot territory and falling under 80 which typically corresponds to a flush lower.

The MACD cross remains bearish (small red circle) and bears are hanging on by a hair of their chinny chin chin. Watch the MACD cross closely this week. The pink box for the ADX shows how a strong uptrend was in place for most of last year but at the start of this year the strong uptrend disappears with ADX dropping down to 20. If the uptrend was strong the ADX should be in the mid to high 20's and above 30 heading higher, so the long 5-year rally is likely very old in the tooth. The pink ovals show the tight standard deviation lines ready to squeeze out a firm move in one direction of the other. The last two moves were higher, one at the start of 2013 and the other was the end of year rally, both fueled by the weaker yen.

The BOJ meets this month to decide on policy. The ECB rate decision is Thursday of this week and will wildly impact global markets. Draghi has the weight of the global economy on his shoulders. His decision Thursday morning will violently impact the euro and in turn global equities. If Draghi provides stimulus or speaks dovishly, the euro will fall, dollar will pop, and equities should move lower, but it is a tough call to make since the central bankers have all price discovery tied up in knots. If Draghi keeps playing coy and does not mention the serious deflation problem in Europe, and is mum on any stimulus, the euro will move flat to higher and stocks will remain buoyant perhaps pushing a higher move out of the tight bands.

The chart is bearish and the projection is sideways to sideways lower for price for the weeks and months to come. However, the central bankers always appear to have a trick up their sleeves. The RUT and COMPQ, Russell 2000 small caps and Nadsaq, respectively, have both dropped to their 20-week MA's, a critical support level. Watch to see if the SPX and Dow follow suit to their respective 20-week MA's. The SPX 20-week MA is 1825.44. Tech and small caps typically lead the broader indexes. 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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