Thursday, November 6, 2014

SPX 2-Hour Chart Negative Divergence Tight Bands Ready to Squeeze Out a Huge Move

Eureka! After about two weeks waiting for the 2-hour to set up properly with negative divergence it is there with the new all-time high printing at 2027.35 today. So a higher high in price occurs and all the indicators are negatively diverged. This indicates that the price move is exhausted. We talked about the little bit of additional juice remaining in the last chart that was posted (RSI and MACD lines green lines) and price comes up for the higher high in price also filling the 2018 gap and this last bit of oomph is satisfied.

The stochastics are trying to build some additional short term juice (green line) but overall the SPX is ready to pull back for a rest from the huge rally move. Note the standard deviation bands (pink) squeezing in tight for a big move. Over the last week, four major binary market events occur (BOJ QE; US Elections; ECB Today; Jobs Tomorrow) which are sending markets wildly in one direction or the other and the charts have to absorb these shocks.

The tight bands say a huge move is at the doorstep (tight bands only foretell a huge move but not the direction). With the Monthly Jobs Report on tap in the morning, can the chart print a couple more handles and wait for that decision before fully committing to the downside? Tomorrow is another binary news event so even though the SPX is topping out that does not mean an upside orgy will not occur if a blowout jobs number is printed.

Sticking to the here and now the negative divergence says down is the direction forward. The tight bands say the down should be strong and swift. The only thing that can save the day is the jobs number in the morning.

Use the VIX 14.10 bull-bear line in the sand as a guide (identified by both the 200-day MA and the Keybot the Quant algorithm) as explained in the previous chart. The market bears remain in the game with VIX above 14.10 and if the VIX moves to 15 and higher the tight bands above will resolve with price collapsing lower. All bear hopes will be crushed if VIX drops under 14.10 since bulls will launch equities far higher out of the tight bands. The VIX is squeezed by extremely tight standard deviation bands on the 2-hour chart as well. A big decision is imminent either now, today, or at the very latest at the opening bell tomorrow. 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 12:20 PM: VIX 14.33. SPX 2026.49. HOD 2027.35. TRIN 0.98. Watch the SPX high of the day now at the all-time highest print in history. The SPX neggie d spank down should begin at any time.

Note Added 1:09 PM: The SPX prints a new all-time high at 2027.37 squeezing out two more pennies of loftiness. VIX 14.25.

Note Added 6:32 PM on 11/6/14: The SPX prints a new all-time high at 2031.61 and new all-time closing high at 2031.21. VIX drops to 13.67. The VIX lost the important 14.10 level at about 3:30 PM and stocks catapulted higher from there. Bears need to push VIX above 14.10 tomorrow or they will have to experience more pain with stocks moving higher. The bulls are on easy street as long as the VIX stays under 14.10. The bulls were given the benefit of the doubt ahead of the important jobs report tomorrow morning. For the 2-hour chart, it remains negatively diverged as the red lines indicate, however, the VST strength with the stochastics (short green line) is now shown with the money flow and RSI. Therefore, a couple 2-hour candlesticks may be needed to deflate this very short term juice. The Monthly Jobs Report is 8:30 AM EST (1:30 PM GMT London time). The neggie d (red lines) is enough to send price lower now but it obviously depends on the jobs report. The expectation as per the chart above remains that a top is at hand now and a bearish move can begin, but, what will the binary jobs report number dictate? The tight bands squeeze in real tight to spend the overnight. The upper band is 2030.96 and price violated the upper band today closing above at 2031.21 so the middle band at 2018 and lower band at 2005 are in play. The bulls ran the clock out today and want the jobs report to make the binary up or down decision for equities. The SPX is going to explode one way or another due to the tight bands; probably 20 or 30 handles over the next day or three. Thus, either the bears take the SPX down to 2000 or the bulls are going to run to 2050+ so the stakes are high tomorrow morning. Using the chart above the expectation would be for price to peak tomorrow and start a downward move. VIX 14.10 and JJC 37.02 continue to determine market direction currently according to the Keybot the Quant algorithm. Bears need VIX above 14.10 pronto or they will fold like a cheap suit. Bulls need JJC above 37.02 to receive more upside juice (so watch copper trading overnight; if copper is moving higher bears are in trouble). If VIX stays under 14.10 and JJC under 37.02, equities will stagger sideways tomorrow into the weekend.

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