Friday, May 30, 2014

SPX Daily Chart New All-Time Record Intraday and Closing High Upper Band Violation

The bulls keep the party going by goosing the retail sector yesterday with RTH above 58.59. Materials, biotech and energy sectors also helped create the thrust higher. The SPX prints both a new all-time intraday and closing high at 1920.03. Price remains well above the upper standard deviation line and desperately needs to revert back down; at a minimum a sideways consolidation. The SPX is at the top trend line of the rising red wedge and negative divergence remains across the multi-month time frame (red lines). However, the bulls are creating near-term juice taking advantage of the holiday thin trading as well as the lull period ahead of when Draghi announces the ECB stimulus plan next Thursday.

For yesterday's new price high, the money flow moves flat negatively diverging not endorsing the move higher in price. Stochastics are overbot wanting to see price pull back for a rest. There is long and strong juice for the VST with RSI and MACD line so price should come back up to current levels after any pull back today through early next week. The RSI and MACD strength will likely carry stocks at elevated levels to the Draghi announcement. The expectation is for weakness to reenter markets early June since the near-term strength should not overcome the prior highs for the indicators.

Carry the red rising wedge out to two apex end points. First, use the thin red trend line for the lower part of a wedge and that will point to late June-early July where price would have to exit the wedge, and rising wedges are bearish, so a market top would be projected here at 1920-1940 within the next six weeks and more likely within three weeks. Using the two thick red lines for the rising wedge, an apex occurs out in August-September at 1960-1980 as a market top and wedge failure area. The low volume, and overbot and unagreeable indicators do not favor the latter outcome but in these markets you never know.

QE is set to taper and wind down in the September-November timeframe so stock market weakness would be anticipated by, say, September or sooner. Thus, if the markets do not top over the next month or so, the bulls may be able to keep the party going, albeit more of a sideways party, into and slightly beyond Labor Day. The monthly charts receive a new print today and May will log an up month. Near-term projection is a sideways stumble with a slight upward bias for a few days, say through 1900-1928, and then a down move should begin. Draghi would be the wild card that may keep the party going beyond late next week. Market bears got nothing unless they send retail stocks lower RTH under 58.59. BNNY is collapsing pre-market on weak earnings so this should set a negative tone for the retail sector. 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.

Note Added 8:45 AM:  BNNY laid an egg losing -16% but BIG beats on earnings and jumps +11% continuing to show a mixed picture for the retail sector. Consumer spending data, however, shows a decrease in April for the first time in one year. The global economy is supposed to be doing great but companies continue firing workers, consumers are spending less and structural unemployment for the middle class and poor is here to stay. The Fed makes the rich richer, however, with their easy money. Look at the top 1%. Former MSFT CEO Steve Ballmer buys the LA Clippers basketball team for $2 billion. Ballmer no doubt sends a thank you note to former Fed Chairman Bernanke and current Fed Chair Yellen on behalf of himself and all the wealthy. The rich stick together and now Bernanke is rewarded for taking care of the big banks and wealthy 1% by attending speech gigs and luncheons, sponsored by the wealthy, at $250K a pop. Yellen salivates knowing she will receive her monetary rewards as well in a few years for making the rich richer through Fed policy.

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