Tuesday, December 23, 2014

SPX 2-Hour Chart Negative Divergence Developing Overbot

The SPX prints new all-time highs today celebrating the joyous Q3 GDP with a 5-handle; +5% growth in Q3. The new all-time intraday high is 2085.61. Glasses are filled to the brim with Fed wine as revelers toast Fed Chair Yellen while donning Dow 18K hats. The 2-hour chart continues to take its good ole time setting up with negative divergence so the bulls keep pushing higher. The histogram, stochastics and ROC are cooked (negatively diverged) and want price to roll over but the MACD line keeps inching out some upside, thus, it will likely take a couple more candlesticks to roll over (each candlestick is two hours of time). The other tricky aspect is the RSI that is not overbot; it is moving flat, however, while the SPX price moves higher so the RSI is negatively divergenced. A little pop in price, however could create juice in the RSI that would need another two to four candlesticks to roll things over (4 to 8 hours of trading time which takes markets into and through tomorrow's shortened session).

If the MACD line rolls over in the next candlestick or two, the market top would be this afternoon heading into the close or tomorrow morning. If the RSI receives a touch more juice of upside moving towards the 70 overbot territory then stocks will stay elevated into late tomorrow morning. Stocks may perform a repeat tomorrow of the Thanksgiving day holiday-shortened session where stocks gave up the ghost starting an hour or two before the shortened closing time. If the RSI stays flat and the MACD rolls over the near-term top is in.

The new 2-hour candlestick was from 2 PM to 4 PM yesterday, so the next one would be 9:30 AM to 11:30 AM today, then 11:30 to 1:30, so check the 2-hour chart at about 1:30 PM, in about an hour, to see if a new candlestick prints for the chart above and you can see if the MACD liine is cooperating with the bulls, or the bears. 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 7:44 PM: The SPX prints a new all-time intraday high at 2086.73 and new all-time closing high at 2082.17. The Dow 18K hats are in vogue but the SPX 2100K hats remain in the desk drawer. For the 2-hour chart above, you now see the RSI and MACD line curling over to the downside with price printing the record high at 2087 during the last candlestick so neggie d is in place for all indicators. That is all systems go for the downside for stocks in this 2-hour time frame although the one fly in the ointment is that the RSI never made it to overbot territory. Nonetheless, the projection would be for down from here. Of course any central banker or other happy announcement overnight on the news wires could help the bulls. If a happy news wire announcement does not occur, then bears should exert themselves here forward. If a happy news bite occurs overnight, then the RSI will spurt into overbot territory but the top would simply set up a few days forward. We are in this goofy trading period of half day tomorrow, full day Friday, then next Wednesday markets are closed for New Years Day. The Keybot the Quant algorithm remains long the market and is tracking VIX 14.69. This is the key to the way that stocks will finish the year. If VIX stays above 14.69, now at 14.80, the bears rule and markets will move sideways to sideways lower ahead. If the VIX drops under 14.69, the bears are toast and bulls will be dancing in the streets. Bulls must push VIX under 14.69 otherwise they got nothing despite the new all-time highs.

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