Wednesday, November 19, 2014

SPX Daily Chart Negative Divergence Developing

The bull rally continues, fueled by the central bankers with another higher high and new all-time record intraday high at 2056.08 and new all-time closing high, the 43rd this year, at 2051.80. The indicators are all in negative divergence, however, except for the RSI. Scroll back to the prior daily chart and we were watching the RSI and MACD line waiting for them to print neggie d. The MACD line cooperates with the bears which is surprising since it is typically the last indicator to top out. But the RSI pops higher into overbot territory and the flat neggie d did not hold. Thus, RSI wants to see one more price high after a pull back. The negative divergence with the other indicators should create the initial spank down probably starting today, or tomorrow.

Since one to three candlesticks will be needed for the RSI to turn neggie d, that is one to three days. So the actual near-term top may not occur until Friday or Monday or early next week. The new moon is Saturday and stocks are typically bearish about 65% of the time through the new moon. Some pre-holiday bullishness may kick in next week, however, moving into Thanksgiving.

Marrying the above with the BPSPX and CPCE charts previously posted, the expectation would be for the BPSPX to reverse and drop back under 70 taking away the bullish joy along with the chart above topping out any day forward and rolling over. A topping out would also be consistent with the CPCE chart that says a market top is very near due to the uber complacency in the markets. There are no bears remaining; everyone is bullish cheering the upside buying calls and staying long so that is when they typically get slapped in the face.

Projection is for some weakness for a day or three but price will likely come up once more so the RSI can print negative divergence to match the red lines for the other indicators indicating the near-term top is in place and begin extended downside. Note that the bottoms only occurred with a hair of positive divergence with the stochastics that were oversold. This behavior verifies the central banker intervention that saves the markets preventing any correction from happening. 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 7:58 PM: The initial spank down occurs due to the neggie d with the MACD line, histo, stochastics and money flow. The RSI drops from yesterday's peak which is expected since price moves lower. The thing to watch as mentioned above is if the RSI goes neggie d when price comes back up, or not. The best thing for bears would be for price to actually recover tomorrow and print matching or higher all-time highs. If so, and the RSI negatively diverges, and the other indicators remain neggie d, then the top will be in.

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