Tuesday, October 21, 2014

SPX 2-Hour Chart V-Bottom Recovery Rally

The bulls are running strongly higher with the Nasdaq printing the best day of the year. The bears have abandoned ship. Traders are chasing prices higher buying indiscriminately. The market V-bottom four days ago came with the green falling wedge and positive divergence in the stochastics and money flow, however, technically, more weakness was desired. However, as the Fed and other central bankers have done for nearly six years, the stock market is saved with Bullard proclaiming QE 4 is on the way which created the immediate bottom and sent stocks higher. A day later the BOE promises more easy money. China chimes in and is injecting the banks with liquidity. The BOJ is printing yen every day sending the dollar/yen and stocks higher. The ECB promises more easy money and doubles down today with news reports that the ECB will begin buying corporate bonds. It is an obscene orgy of central banker perversion that would make Caligula blush. The S&P 500 catapults from 1820 to 1938, 118 handles in four days; +6.5%. 

The brown dots show the band violations and then price had to check in at the middle band and finally after the bottom was printed, price returned to the middle band then upper band where it sits now. Price may run along the upper band the mirror image of running down the lower band a couple weeks ago but the middle band is now on the table (at 1885 and moving higher). The stochastics are overbot and cooked. They can bounce along at elevated levels, however, until the other indicators negatively diverge. With the last candlestick price high, the RSI is flat but hinting that it wants to remain long and strong and the histogram is negatively diverged. The MACD line is long and strong and so is the money flow wanting higher highs after any pull back with the 2-hour candlestick/s. So there are likely another 2 to 8 candlesticks before the top prints which is 4 to 16 hours taking trading through today, into tomorrow, and perhaps Thursday. Thursday is a new moon late in the afternoon and equities are typically weak moving through the new moon each month so perhaps a top prints tomorrow or Thursday; it would be perfect timing for the new moon where the week would finish weak.

The key S/R is 1960-1961, 1958, 1951, 1942-1943 (62% Fib), 1936-1937, 1928, 1924 and 1910. Note the gap up today to 1910 and higher. The important moving average support gauntlet is at 1891-1908 engulfing the 200-day MA, 10 and 12-month MA's and the 50-week MA. Price is now up to 1940 as this is typed therefore the 1942-1943 is the next upside resistance level. The RSI is long and strong and the histogram is starting to develop more juice.

Today is a phenomenal run higher for the broad indexes. Bears run for cover so the market jumps higher back to elevated levels with everyone back on the bull side of the boat. This is not healthy market behavior. Very oddly, the TRIN remains at 1.00 neutral although it did push higher, and lower, intraday. Price should keep moving higher until the chart prints negative divergence across all indicators so the 1942-1943 will likely print and it will be key to see if it can hold as a top, since it is also the 62% Fib shown on the previous chart, or not. HOD is 1942.45 printing minutes ago.

Bears will be able to reexert themselves as long as price stays under 1943 (the 62% Fib). Above 1943, and the 62% Fib gives way, and price will target 1951 heading higher probably to the strong 1960-1961 resistance level. 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 3:41 PM: The SPX poked up through 1936-1937 R (now support) so a test of 1942-1943 R should continue. Since price already took a poke at 1943 and the indicators on the 2-hour chart need more time to develop neggie d, price will likely move up through 1943 and target 1951 R. The only savior for bears would be very bad geopolitical news overnight. Comically, traders said earnings would matter this time around. Well they don't. Companies are reporting a mixed bag. KO, IBM and MCD are negative today. Overall, the top line revenue numbers remain lackluster across the board for the last couple years, however, ignore all this silly ole quant fundamental type analysis. The central banker orgy is all that matters and the CB's saved the markets again as described above. Grab your toga and join the party of perversion. Ignore the middle class and poor; they simply no longer matter. Rape the stock market with the Fed's easy money.

Note Added 3:51 PM: The SPX 1-hour chart is negatively diverged for the histogram, stochastics and ROC but the RSI and money flow is long and strong. This hints at a 2 to 5 candlestick time frame to create the top which is 2 to 5 hours of trading time. This would hint at a near-term market top tomorrow occurring at either 1943, 1951, 1958 or 1960-1961. You can gauge the further strength of the rally by noting how price reacts to the S/R levels. For now, the 1943 R is holding.

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