Friday, January 16, 2015

SPX Monthly Chart

The monthly chart has been highlighted with the negative divergence forming at the top indicating that a multi-year top is at hand a la 2000 and 2007. Note that the negative MACD cross occurs which is a very bearish development. This is the first MACD cross since late 2012 when this last leg of the robust stock market rally began.

The negative divergence (red lines) with price printing matching and higher highs while the indicators roll over create the spank downs off the top. The collapses from rising wedge patterns can be quite dramatic. Price will likely experience fits and starts and play around at the critical 10 and 12-month MA's before the collapse under occurs. The 10-month MA is 1981 a key level followed by old-time traders. Many algo's have this level programmed so a failure at 1981 creates major negativity. The failure in October created panic among the central  bankers that colluded globally to bring the stock market back from the edge and create the historic rally from late October to early December.

The neggie d spankdown occurs in December but once price tagged the 10 MA the Fed and other central bankers panicked again. This is when Fed Chair Yellen flapped here dovish wings at the FOMC meeting to create the December bottom and save the day. Another test of the 10 MA would be the third test in about as many months. Is the third time the charm for the bears?

So watch the 10-month MA at 1981 since major market turmoil will follow if it gives way. One of Keystone's key cyclical market signals is the 12-month MA. Keystone calls it the cliff. Markets can potential drop into free fall under this level; the 12-month MA is 1962 and rising. October was a strong volume month mainly due to the selling but the month ended higher in price. The volume in January will be important compared back to October. 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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