Tuesday, February 17, 2015

SPX 2-Hour Chart Overbot Rising Wedge Negative Divergence Developing

Here is the 2-hour chart the idea was to wait for the MACD to negatively diverge so the near-term top can be identified. That pesky bugger keeps floating higher (green line) albeit by a tiny smidge but it is enough to create another jog move, down up down, for the near-term top. The red lines show negative divergence in place wanting to see price move lower right away. Watch for the negative MACD line cross for confirmation of the downside.

The top would be expected in only one or two candlesticks so within a couple hours or so, that would be tomorrow (Wednesday) morning. Marrying the 2-hour chart to the daily chart, softness in stocks would be expected for a day or three, but the daily chart wants price to come back up again above 2100 say early next week. In the near-term, the SPX would be expected to top out in the morning and begin retracing to key levels such as 2089-ish and 2082-ish.

Of course any central bank announcement will send markets wildly one way or another overruling the technicals. Everyone, including the cab driver, expects the Greece bailout to be resolved positively any day forward. The risk is asymmetrical. Much of any stock market gain is likely priced in for the happy Greece outcome but the negative outcome, if something goes awry, is not priced in so stocks would take a big hit if Greece does not receive the bailout within the next 10 days.

For tomorrow, the bears will get a turn at bat as per the technicals described above; the overbot conditions, rising wedge and negative divergence (once the MACD line cooperates) will create the spankdown. 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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