Sunday, August 3, 2014

SPX Monthly Chart Overbot Rising Wedge Negative Divergence

It has been quite a drama watching the bulls punch the bears in the face month after month. July finally prints a negative month stopping the five consecutive up month trend. The negative divergence in place now was highlighted each month as it developed. Remember the MACD line that gathered juice because it is above the 2007 high, however, over the last couple months, even the MACD line is now negatively diverged. All the indicators are negatively diverged now. Last month's intramonth high at 1991 created a new price high with all the indicators printing lower levels (neggie d). The rising wedge, overbot conditions and neggie d is a powerfully negative force and has been mentioned many times, the collapses from rising wedge patterns can be quite dramatic.

There is no reason for price to move higher again. The indicators are in universal agreement with negative divergence so there is no further oomph available in any of the time frames (last couple months or last few months or since 2007). The chart is cooked. Now can price venture higher to test the all-time highs again? Sure it can but the forecast would be that price would return to 1950-1980 and likely fail beginning another stronger leg lower.

The old-timer's pay the 10-month MA at 1879.21 great respect. The failure of the 10-month MA signals that the markets are falling down the rabbit hole. The queen will say "off with your head" like she said to Alice. To begin the year, the bears looked ready to rock and roll with the strong market selloff in January and early February but price came down to test the 10-month (tiny purple circle) and bounced. The fix was in and the bear's were slapped in the teeth once again.

A rupture of the 1879-1900 area is big trouble. The projection is for lower prices for the weeks, months and perhaps year or two ahead, sideways to sideways lower, with the potential for a sharp rising wedge collapse to occur ( a couple hundred point or more drop in a relatively short time frame). Key S/R is 1991, 1988, 1985-1986, 1976, 1973, 1968, 1963, 1960-1961, 1949-1950, 1924, 1912, 1902, 1897, 1891, 1884, 1878, 1872-1874, 1848, 1841, 1831, 1828, 1808, 1803 and 1800. 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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