Thursday, October 30, 2014

SPX 2-Hour Chart Overbot Rising Wedge Negative Divergence Upper Band Violation

Here is an update of the SPX 2-hour chart saga we have been watching since late last week. Back then, the RSI did not reach overbot territory and the MACD line was long and strong so more up in price was expected. The Fed decision throws a wrench in the works as the new week begins since markets tend to be positive in front of the FOMC meeting. In addition, markets are typically bullish the week in front of mid-term elections which is this week. Also, traders are perhaps sniffing out a republican takeover of the Senate and perhaps more business-freindly legislation on the way. To add on to the bullish orgy, and now that the Fed ends QE, global traders realize that Draghi will likely fire the QE money bazooka in the coming weeks and pump the European stock markets higher for months to come. Some of that ECB QE will filter into the States to keep stocks buoyant. Last year, 2013, the bulk of the +30% gain in the broad indexes was due to the BOJ easy money.

There were a couple fake-outs with the chart this week. Getting everything to line up properly can be like herding kittens sometimes. When the MACD line negatively diverges then the RSI decides to become long and strong and visa versa. Everything has to line up with neggie d to signal the near-term top. The chart is set up favorably for a pull back now (red lines).

Price has violated the upper standard deviation band (pink) so a reversion back to the middle band, at a minimum, at 1973 and rising, is on the table; also a move to the lower band at 1946 and rising is on the table. Clearly all indicators are neggie d now (red lines) where price moves higher but the indicators are sloping lower showing that price is out of gas. The expectation would be for the SPX to receive a negative divergence spank down. The strongest S/R is 2019, 2011, 2007, 2005, 2002-2003, 1998, 1985-1986, 1978, 1973, 1968 and 1965. The HOD is 1999.40 so price actually punched up through the 1998 R but on closer inspection, price punched up through, then failed a few minutes later, then again, and failed again, so the 1998 R holds.

The SPX started the month at 1972.29 and the month ends tomorrow so October will be a positive month unless the bears can take away 22 handles from here by 4 PM EST tomorrow. So the overbot conditions, red rising wedge and universal negative divergence should create a spankdown. Keep an eye on the MACD line cross that is a smidge away from crossing negative. Obviously, for the downside to occur, the MACD lines need to cross and move lower. 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 3:12 PM: The SPX receives an initial spank down from the neggie d to 1988 and now pulses higher. The MACD lines create a negative cross with the black line now under the red line but keep an eye on it to see if it holds. The S/R above shows a big zone between 1998 and 1986. Drilling down between these two strong levels the S/R is 1998, 1997, 1993, 1991, 1988 and 1985-1986. So price bounces now and hits its head on the 1991 R. So there are the two key levels, 1991 and 1988. Bulls win above 1991. Bears win under 1988. Price is staggering sideways at 1990.

Note Added 3:21 PM: Here's the test of 1991 R so price will either bounce or die.

Note Added 3:26 PM: Die. So the bears get a turn at bat and test the 1988 S to see if they can punch out of this 1988-1991 zone. So bounce or die from 1988.

Note Added 3:30 PM: Bounce. SPX is 1989. So the battle continues. Bulls want 1991+. Bears want to push under 1988. Who will win?

Note Added 3:35 PM: Here's the test for the bulls at 1991 R again. Bounce or die.

Note Added 3:47 PM: Bulls poke up through 1991 R so 1993 R is targeted. Bears need to push under 1991 that is support now. The negative MACD cross on the 2-hour chart remains and along with the universal neggie d, overbot stochastics, rising wedge, and upper band violation, as discussed above, the expectation would be for the SPX to sell off moving forward. Of course if a positive news event occurs charts would have to reset again but barring a positive news event the direction should be down. With the robust two-week momentum rally price has a lot of power and juice so some sideways movement is reasonable as price rolls over.

Note Added 3:53 PM: The bulls poke up through 1993 R, well maybe not, looks like 1993 is holding. If price moves up through 1993 R then 1997 R would be the next target. The MACD cross remains negative but the bulls are trying to reverse it into the closing bell to squeeze out more juice.

Note Added 3:56 PM:  The 1993 R is holding with only four minutes remaining.

Note Added 3:58 PM: The SPX pokes up through 1993 R and turns the MACD line cross positive--that is the bullish momo remaining in price. Note that the NYA moves above the 40-week MA which places the cyclical bull market pattern back in play. This keeps flip-flopping back and forth in recent days and is an important indicator for the weeks and months ahead. The fight for the NYA 40-week MA should continue tomorrow and even through next week.

Note Added 4:01 PM: The bulls print 1995 at the closing bell spending the overnight in the 1993-1997 zone. The bears will need to turn the MACD cross negative again on the chart above tomorrow. The expectation remains that the SPX should move lower from here with a near-term top in place so tomorrow we will see if this comes to be, or not.

Note Added 5:35 AM on Friday, 10/31/14: The positive news event occurs; a double whammy from Japan. The government is boosting its stock purchases by 25%  and the BOJ also announces more stimulus. It's obscene. The central bankers are the market. The SIP data feed outage yesterday was likely caused by the purchase of 15000 E-mini S&P's so the insiders are always told ahead of time. The markets are obviously rigged. Wall Street is an insider's game. The technical's and fundamentals take a back seat to the central banker easy money policies. S&P futures catapult higher +22. Dow is up nearly +200 points. Nasdaq +65. Banzai!!! The chart above will have to reset since a positive news event, an epic news event, occurs a few hours ago. The SPX is headed straight to the all-time high at 2019.

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