Monday, May 12, 2014

SPX Weekly Chart Tight Bands

The pink lines show the standard deviation bands squeezing in tight ready to create a sharp move in one direction or the other. We will know over the next couple weeks. The bands have not been this tight since springtime 2007. Those tight bands squeezed out a move higher which sent markets to the October 2007 multi-year top with the bulls running for six months higher from 1380 to 1580 after the squeeze move, a couple hundred handles. If that would occur, all the analysts, over 90%, that continue to call for SPX 1900 and 2000 will be correct.

A squeeze lower from the tight bands would likely place the multi-year market top now. The negative divergence red lines and rising wedge was an easy call for the top and sell off to begin the year. The negative divergence maroon lines also identify recent tops. Price is now coming up again to tease this 1890's area with the blue line and the indicators remain weak and uninspired across the few-month time frame, however, the bulls are creating shorter term momo with the stochastics and money flow wanting to see some further buoyancy. This behavior will likely keep the bulls and bears guessing for a few days more as the squeeze move out of the tight bands occurs and the die is cast.

The 50-week MA now at 1760 has not been tested since November of 2012. The central banker easy money is enormously powerful and overcomes market negativity to continue to goose the stock market higher. The reversion to the mean always occurs in the end. The 5-year rally is very long by historical standards. The secular bear market cycle from 2000-2018 needs to re-exert its negativity.

The projection is for a major market move to occur within the next week or two where price commits to a firm direction up, or down. The point is that this sideways malaise will likely end in mid-May and a winner and loser will be decided for the weeks and months ahead well into summer time. If the move is lower, a multi-year top is very likely in place. If the bulls push a move higher, which will run well above 1900, stocks may remain buoyant into a potential September-October multi-year top. Watch resistance at 1878, 1884, 1891, 1897 and 1900. Current thinking is the bears win out but the central bankers prove over and over again that they carry a big money bazooka. 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 10:01 AM:  The SPX catapults higher today fueled by strong copper and a recovering retail sector. Price is printing above the all-time closing high at SPX 1890.90 so the day will need to play out to see if the bulls can maintain this level and higher. HOD 1892.41.

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