Monday, November 10, 2014

SPX Daily Chart Expansion 'Megaphone' Pattern Negative Divergence Developing

In the daily time frame, the SPX price is moving through an expansion pattern shown by the blue lines. This is also called a megaphone pattern for obvious reasons (a handle is added to create the illusion). Right now you would be yelling into the megaphone, "Caution."

The momo is off the charts for this central banker-led rally. The global central banker collusion is epic and historic and it is amazing how the media ignores this important story. The stock market bottom three weeks ago was created by Fed's Bullard hinting that more QE remains on the table. Other dovish Fed members chime in. The BOE then followed with promises of more stimulus. The biggie was the PBOC injecting billions of liquidity into the Chinese banks and corporations which creates more upside. The ECB promises more QE so stocks receive another push higher. Then the BOJ fires the huge QE money bazooka on Halloween, shock and awe; it is raining money at this points and that money sloshing around has to go some where so it pumps stocks (and bonds) higher and the global asset bubbles grow larger and larger. Not to be outdone, the ECB provides dovish talk last Thursday and US elections and the jobs report also create more joy. This is how you receive an over 200-handle SPX rally in three weeks time.

The red lines show negative divergence developing which will spank price lower, as well as the rising red wedge and overbot conditions. However, the MACD line is long and strong and wants another higher high after any pull back in this daily time frame. This jives with the weekly chart that is also negatively diverging but likely needs a couple more weeks to set up properly. The 2024 and 2018 levels are strong support. Price may play around at the upper trend line a couple days and then drop to support then back up then roll over. The lower target zone for the expansion pattern is at 1800-1860. 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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