Sunday, November 30, 2014

SPX Weekly Chart Overbot Negative Divergence

The SPX monthly chart was posted yesterday so scroll backwards for further study or type 'SPX' into the search box at the right to bring up that chart. The weekly shows the spectacular central-banker fueled orgy from the mid-October bottom at 1820 to the all-time historic top on Friday at 2075.76; a 256-point move in the last six weeks, +14%! If you recall, the top in September was an easy call with the negative divergence (red lines), overbot conditions and the rising wedge pattern. It is very surprising that price recovered as strongly as it did but then again the six-week rally is purely due to the collusion of global central bankers so it is not all that surprising. In 'normal' markets price would have never recovered like it has.

The maroon lines show the neggie d remaining for the new price highs with the exception of the histogram trying to squeeze out more upside juice as well as the very near-term momo in the MACD line. So a jog move may be on tap where equities sell off for a week then recover for a week then roll over again. The volume is dropping off during the entire up move and nowhere near the capitulatory-style volume at the mid-October lows. The brown circles show distribution taking place during 2014 with the smart money handing off shares to the dumb money. The smart money is trying to tip toe out the back door trimming and dumping positions as their lieutenants appear on television each day pumping the markets.

Price came within three points of tagging the upper standard deviation band at 2079. A move back to the middle band, the 20-week MA at 1985 would be on tap as well as the lower band at 1890 in play. The bulls have a lot of momentum on their side, however, markets typically hit a lull period early December due to tax loss selling so if the bears fight back now is the time. The stochastics are overbot and want price to fall. The inverted hammer candlestick last week shows that buyers pumped the price to new all-time highs but the sellers were able to push price back down to end the week; this behavior places a question mark as to how strong the trend actually is and a move lower for the new week ahead will verify the inverted hammer as a trend change candlestick.

Equities may jog at these levels at 2052-2076 for a couple weeks but the expectation would for price to roll back over again and the happy ending for the year may not materialize as the universal consensus expects. 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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