Thursday, November 20, 2014

SPX Daily Chart Overbot Negative Divergence

Here is an update of the daily chart with two more candlesticks (days) to see if the RSI has set up with neggie d yet. (Reference the previous daily chart.) As seen above, the RSI is now overbot and is negatively diverged. The other indicators remain negatively diverged as well with the new price high. That's it; price is at the near term top. There are two caveats, however. First, if a positive news event occurs overnight, say a central banker coughs and it sounds like he said 'stimulus' or 'quantitative easing', well, obviously stocks will rocket higher and have to reset. The central banks are the market.

Second, since tomorrow is Friday, bulls have an advantage since shorts will typically pare back positions into the weekend creating market lift. Therefore the bulls may squeeze out another happy white candlestick into the weekend, however, the expectation is that for that price high, if it occurs tomorrow, the RSI should still remain neggie d so the slap down would simply start on Monday.

The way things are set up now the expectation is for a spank down to begin tomorrow. For today (Thursday, 11/20/14), the bulls print a new all-time closing high, the 44th record high this year, at 2052.75. The all-time record intraday high remains at 2056.08 on 11/18/14The indicators are all in negative divergence. Scroll back to the prior daily chart for further study and understand how the chart progressed to today. Watch for the negative line cross for the MACD which would lock-in the bear action ahead.

Another feather in the bear's cap is that markets are typically weak moving through the new moon which is Saturday. Thus, if the bulls do sneak another high out tomorrow into the weekend, or are printing an intraday higher high, that will likely be an excellent short opportunity as the set up is now (as long as the RSI remains neggie d). The BPSPX is up to 71 now above 70 for three days; each day placing another nail in the bear's coffin. The bears must reverse the BPSPX under 70 pronto, otherwise, even any near-term sell off will only allow the dip-buyers to come back in. If BPSPX moves back under 70 that signals a more extended move lower for stocks.

The projection is that a near-term top is in and the bear's will receive a turn at bat going forward. The negative MACD line cross will create more downside fuel as well as the BPSPX dropping under 70. Negativity is on tap for markets if the VIX moves back above the 200-day MA at 13.87 and sustainable market selling is on tap above VIX 14.36 (idenitifed by the Keybot the Quant algorithm). VIX lost the 200-day today which is a feather in the bull's cap.

After an obscene central-banker induced one-month rally of well over 200 SPX handles, the bear's finally receive a chance (as long a the neggie d on the RSI holds). A VIX above 13.87 and the negative MACD cross for the chart above will guarantee bear victory into next week. If the RSI sneaks out another high compared to three days ago, then the bears will have to wait a couple more days. Key S/R is 2056, 2053, 2046, 2040, 2038, 2032, 2024 and 2018. The RUT retraced under its 20-day MA which is 2020 and rising for the SPX. 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 6:34 AM on Friday, 11/21/14: The central bankers ride to the rescue as mentioned above with the first caveat--you could almost smell it ahead of time. ECB President Draghi provides more lip service about upcoming stimulus that had already sent S&P futures up +6 then they double again after the PBOC (China) announces a surprise interest rate cut. Global indexes catapult higher. S&P +14. Dow +125. Nasdaq +32. Copper moves higher. The bulls want to keep the stock market elevated into Thanksgiving. The central bankers collude to keep the stock market elevated and it was obvious from the chart above that they would need to goose things to keep the party going. Watch the RSI today. If the RSI prints a higher high than three days ago the party continues into and through Thanksgiving. If the RSI remains neggie d at the end of today, after the pop in stocks, then the downside will kick in early next week as described above. Usually central banker pumping moves, like this morning, result in 20 to 30 SPX handles of upside.

No comments:

Post a Comment

Note: Only a member of this blog may post a comment.