Monday, May 5, 2014

SPX Weekly Chart Upward-Sloping Channel Price Extended

The weekly chart was very instrumental in calling the market top to begin this year as well as the March-April weakness but the bulls are fueled by the Fed and BOJ easy money which is a powerful force. The short green bars for the indicators show how the bulls are desperately trying to stop the downside and continue the upside party in the near term. The red lines show the continuing negative divergence across all indicators on the weekly time frame for the past months. The pink dots show the ongoing extended price ribbon. Each time price becomes overextended to the upside way above the moving averages a mean reversion lower must occur.

On Friday, price came up to the 1891 resistance where it was spanked down. Price should top in the pink circle which jives with the expectations on the monthly chart. Bulls may extend some near-term upside strength but this should play out in days or weeks. Note the strong buying volume for the week in early February when stocks bounced. It would be prudent for price to test 1750-1800 to decide if stronger buying volume comes in to confirm that up is the preferred direction ahead, or, failure where strong selling volume enters signaling a weaker stock market for months and potentially years to come.

Price keeps bouncing off the lower rail of the upward-sloping channel so obviously a failure at 1850-ish is a game changer for markets moving forward. Price has not touched the 50-week MA in about 18 months very atypical behavior so a mean reversion to this level is desperately needed, currently at 1755 and rising. Projection is for price to continue topping out and rolling over to the downside although the near-term strength (short green lines) must be respected where the bulls can squeeze out a week or three of sideways with a slight upward bias. Geopolitical events (Ukraine) may finally create negativity. Traders have generally ignored the trouble so far. Watch the 20-week MA at 1840.49 and rising and 50-week MA at 1755.45 and rising as the weeks play out. 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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