Thursday, October 16, 2014

SPX 2-Hour Chart Oversold Falling Wedge Positive Divergence Price Extended to Downside

May as well post the 2-hour chart again since we have been watching it for several days. The chart was setting up with universal positive divergence but the MACD line has not yet cooperated. It was very close this week but the negative news flow especially the Ebola outbreak that may be spreading in the US has everyone in a tizzy and the MACD line kept falling lower. How unsurprising it is for people to suddenly care about a deadly virus once it may affect their own lives? Humans are so predictable.

So the markets tank on every Ebola news bite. S&P futures are -29 pointing to another drubbing after the opening bell. The market selling yesterday results in the RSI printing a lower low. The last two candlesticks have equal price lows so technically the green lines show positive divergence in place even with the MACD line, universal possie d opening the door for the bottom and upside ahead, but in such wild markets that is a fig leaf of possie d iwth the RSI and MACD line. Price may want to come back down to make double-sure that the relief rally is on tap ahead.

The stochastics and money flow are firmly positively diverged and very instrumental in creating the launch higher for the current candlestick. These indicators are long and strong as well wanting to keep moving price higher. The RSI is near taking out the prior high which would also create more bullishness. Price is extended to the downside (blue dots) so a mean reversion is needed (price moves higher). So the cards are lined up for the bulls despite the drastically negative futures. Equities may wash-out after the opening bell and then print a bullish day going into the weekend.

The S/R levels to watch are 1897, 1889-1891, 1888 (50-week MA), 1884, 1878, 1874-1872, 1848 (starting year number), 1841, 1828-1831, 1808, 1803, 1800 and 1796This 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 12:43 PM: The SPX holds the 1841 support level. Price dipped into the 1835 (LOD) to 1840 area but this was short-lived. So watch the 1841 S and the LOD at 1835.02. Price may want to take a look at the 1831 support since it violated the 1831-1841 area. SPX recovers today after Fed's Bullard says QE may be extended. Bullard was a hawk but now a dove as he rips off his Joseph A Bank five-for-one suit jacket to expose dovish wings. He flies around the stock market exchanges winking to the traders and dropping money from the sky. Markets run higher with traders ready to rape the stock market upside as the Fed will provide more easy money in the future. The central bankers are the market. Equities enjoy buoyancy with the SPX printing a HOD at 1867.82 so watch that number. For the 2-hour chart saga above, the indicators recover as described and point to higher highs ahead. The RSI is flat compared to three candlesticks ago so that really needs to start moving higher to prove that the bulls have juice. The positive MACD line cross is also needed to prove the bullishness. The Fed saves the day today. All Hail the Fed! They provide the daily market sustenance. Interestingly, a Fed surprise statement like Bullard's should provide far more upside juice than it is. The SPX was 1845-ish when Bullard pumped the markets so a 20 to 30-handle move due to the lip service would target 1865-1875. Price is at 1858.

Note Added 12:59 PM: The SPX is positive up to 1865 running higher so it is receiving the boost expected from the Fed dove talk.

Note Added 1:49 PM:  Bulls take out yesterday's HOD at 1874 which is a feather for their caps. Price is currently fighting in the 1872-1874 S/R zone. Above 1874 R charts the way to 1878 R. The 2-hour chart indicators are long and strong now with the RSI pointing higher and the MACD positive cross about to occur. Looks like the bulls have their relief rally in progress. Bullard's dovish talk creates 30 handles of upside typical for a Fed pump. The BOJ is printing yen sending the dollar/yen pair from 105.60 to above 106 over the last few hours so the weaker yen creates the upside market fuel. The central bankers are out in force today with Bullard providing Fed lip service and the BOJ bludgeoning the yen.

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