Saturday, April 25, 2015

SPX S&P 500 Monthly Chart Rising Wedge Overbot Negative Divergence

The monthly charts will receive new prints on Thursday for the EOM. April began at 2068 so the month is positive with four days remaining. Keystone has posted this chart over the last year providing the play-by-play waiting for the multi-year top to print. Note how price fell out of the rising wedge last month (March) but now recovers in April to back kiss the wedge trend line from the underside for a bounce or die decision.

The red lines show negative divergence across all indicators (bearish). It took a long time for the chart to set up for the bears. The MACD cross is negative. If April finishes here or higher the indicators should remain negatively diverged pointing towards a weak May ahead. Price is extended above the moving averages requiring a mean reversion lower. The collapses from rising wedge patterns can be quite dramatic.

The 18-year cycle is the most reliable cycle with a secular bull from 1982 to 2000 and markets are currently in a secular bear market from 2000-2018. It is normal to have strong cyclical rallies inside secular bears. The chart set-up hints that the bears will finally begin growling again to finish off the secular pattern into 2018. It would not be surprising to see the stock market down say 3 of the next 4 years. The chart can be revisited after April's print is finalized later in the week ahead. The expectation is for a multi-year top to occur now; it is actually a bit surprising to see the SPX print a new record high last week as the indicators are already spent showing a lack of oomph available moving forward.

The Nasdaq monthly chart is similar except for the MACD continuing to slope slightly higher which indicates that the tech stocks may need a couple more months to officially top out for a multi-year top and this juice in tech stocks helps to elevate the SPX and Dow which are wanting to simply call it quits to the six-year rally going forward. The broad stock market is expected to top out at current levels with all indexes peaking and rolling over now through July. The market bears need a little more patience but their long multi-year wait for weaker markets for the weeks, months and likely a year or three ahead is very near.

Pay attention to the 10-month and 12-month MA's at 2033 and 2018, respectively, since these levels signal the official end to the six-year rally. The 10-month MA is an early warning signal that the old-time traders use and many algorithms, including the Keybot the Quant algorithm, Keystone's proprietary algo, program the 10-month MA into the computer models. Markets go off a cliff when the 12-month MA fails. 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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