Monday, June 8, 2015

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

Keystone has provided the play by play on the monthly charts over the last year and more monitoring when the multi-year top would appear technically. It's here. May prints a positive month with new all-time record highs. Note, however, the indicators have universally rolled over with negative divergence (red lines). Price is overbot (bearish). The red rising wedge is an extremely ominous bearish pattern as mentioned many times over the last few months. The collapses from rising wedges can be quite dramatic. The MACD cross occurs with the black line under the red line (bearish).

The maroon-colored line shows negative divergence in place compared to the 2007 market top as well. The monthly volume candlesticks show distribution taking place with big selling volumes occurring after the up months. This is the smart money handing off stocks to the dumb money. Retail investors are hyped daily by business television happy talk and are buying at the top as the hedge funds and others dump their shares. Every market top needs a bag holder.

The current price action as reflected in the chart is similar to the October 2007 market top. Can the SPX run higher? Of course it can but the upside appears very limited and there is a high likelihood that the multi-year top is in. The Dow is rolling over in the same manner but the Nasdaq may need a couple more months to properly top out. Regardless, the above chart is very negative. Perhaps the bulls may be able to keep a happy face as they enjoy the beach and summer vacation, but the chart says the end is very near and the multi-year market top may have already printed in May. It is prudent to exit long positions.

The 10-month MA is 2057 and 12-month MA (the cliff) is 2042. Extremely bad things will happen to the stock market under these levels. The 2057 level would be key; if it fails stocks are likely going to collapse in earnest. Going forward, bulls must hold the 2057 level with all their might. 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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