Tuesday, August 19, 2014

SPX 2-Hour Chart Upper Band Violation Negative Divergence Developing

The 2-hour chart marches along with long and strong RSI and MACD line wanting higher highs. Money flow, stochastics and the histogram are all negatively diverged wanting price to drop from here. The strong 1976 resistance did not hold for bears. The 1976 held for the first one-half hour of trading then a tape bomb occurs that says Russian President Putin and Ukraine President Poroshenko will meet on 8/26/14 to discuss a resolution to the Ukraine civil war. The SPX pops to 1979. Perhaps the Ruskies have large blocks of index call options and the positive news, firmly in their control, places dough in their wallets.

Listing the key SPX S/R from the weekend missive; 1991, 1989, 1988, 1987, 1986, 1985, 1982, 1980, 1978, 1977 and 1976. The breach of 1976, since it is a very strong S/R level opens the door to the 1985 resistance since it is the next very strong resistance. In the middle the 1976-1978 zone is a resistance zone, and price has overtaken this resistance. The 1980-1982 area is next with price now printing a 1979 handle. There is a gap that needs filling at some point forward at 1985-1987 and in some respects bears may be best served to simply fill the gap and drop from there. A back test move to the important 1976 support would be prudent.

The SPX is at the upper standard deviation band (pink line) so a move back to the middle band at 1955, and rising, at a minimum, is required. Note that price has retreated back to the middle band twice over the last week and a trip back to the lower band at 1927, and rising, is on the table and overdue. The SPX cannot roll over until the neggie d is in place across all indicators so watch the RSI and MACD line. 1 to 3 candlesticks are needed to produce the neggie d so that is 2 to 6 hours of trading time which will take up the bulk of today's trade and into the opening bell tomorrow morning.

Since the SPX blew threw 1976-1979, the 1980-1982 and 1985-1987 levels are in play for the top price print as the 2-hour chart tops out. Marrying the chart above with the CPCE put/call ratio chart highlighted last evening verifying market complacency, equities are likely topping today or first thing tomorrow morning.

Keystone's proprietary trading algo, Keybot the Quant, is long the market and watching copper and volatility; JJC 38.61 (price is under creating market negativity) and VIX 12.84 (price is under creating market bullishness). At the opening bell, copper was moving higher and volatility lower which provides bull fuel. Copper has since rolled over to the negative side but cannot help the market bears much since volatility is collapsing with the VIX now sub 12. The Fed steps on the neck of volatility when they want the stock market to rise. The dollar/yen is runing higher in recent days today up to 102.75 so the weaker yen (created by BOJ money printing) also fuels the stock market upside.

The bulls need JJC above 38.61 if they want to create new all-time market highs so watch copper. The bears need the VIX above 12.84 or they got nothing. The VIX collapsing under 12 is a bear killer today. TRIN is 0.63 uber low so say no more; the bulls are in full control today. The low TRIN will jive with a low CPCE and the neggie d developing in the 2-hour chart above all pointing to a near-term market top coming likely today or tomorrow. Watch the RSI and MACD on the chart above to know when the fix is in. 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 11:55 AM: SPX 1979. JJC is 37.81 under the 38.61 bull-bear level dropping today which makes for happy bears. VIX is 11.97 well under the 12.84 bull-bear line making for very happy bulls. The low volatility is rocket fuel for the indexes. Ditto the low TRIN at 0.63. Dollar/yen 102.84. Banzai! The VIX and the dollar/yen are key today.

Note Added 7:26 PM: The bulls kept running today and the RSI and MACD line remain long and strong like the chart above shows so another 1 to 3 candlesticks would be needed to form neggie d (about 2 to 6 hours of trading time). The SPX stalled at the 1982 resistance mentioned but since higher highs in price are desired by the RSI and MACD, price likely wants to fill the gap and touch the early July highs at 1984-1987. Bears may as well allow the SPX to fill the gap to get it over with since it is only a couple points away; this would button-up any need to go higher. The daily chart indicators remain long and strong so on a daily basis the SPX will want to revisit these price levels after any near-term sell off (a down move of a few days). VIX recovers to 12.21 so when the SPX cmae up to test 1982 R you knew it would not go through. If VIX was under 12, the SPX would have sliced up through 1982 like a hot knife through butter. Dollar/yen 102.92 running towards 103. Banzai! The weak yen helps create the stock market orgy. TRIN finishes at 0.80 after the 0.57 low firmly bullish all day reinforcing the light volume rally. Watch volatility, copper, dollar/yen, and the RSI and MACD line on the 2-hour chart above; they will tell you which way the market ship is going. Copper dropped -0.8% today.

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