Friday, August 21, 2015

SPX Monthly Chart

Keystone has pointed out the progress on the SPX monthly chart over the last year and its rolling over due to the negative divergence, overbot conditions and long term rising wedge from 2009-present (a bearish chart pattern). Drilling down and focusing on the last year, higher prices come with the indicators turning neggie d (red lines) so you knew a spank down was on tap on the monthly basis.

The 10-month MA at 2069 and 12-month MA at 2057 are extremely important moving averages that dictate intermediate and long term direction of stocks. The 10-month is followed by the old codgers on Wall Street and not often talked about otherwise. Many algorithms have the 10-mth MA programmed. When 2069 failed, markets were in big trouble, the 10-mth MA is a major warning signal.

Keystone calls the 12-month MA "the cliff" since very bad things begin happening to the stock market when the 12-mth MA fails. The year began at 2059. The 50-week MA is 2060. The 200-day MA is 2078. Once the 2057-2060 support failed (which now becomes overhead resistance), stocks slid down the rabbit hole. Pay close attention to the 12-month MA at 2057 going forward. Bears rule under 2057. Bulls recover above 2057.

The brown circles show distribution taking place where the hedge funds and other smart money is handing off shares to Ma and Pa Sucka and Joe Sixpack. The happy months stir up the animal spirits of the retail investors so they run in to buy stocks and that is when the institutions distribute their shares (higher volume). Talking heads appear on television preaching higher stocks to create the pump and dump scheme. This method allows the smart money to squeeze out the back door and let the sucka's hold the bag. The best part of it all is that after stocks selloff for months and wash-out the retail investor gives up and takes the losses. That is when the smart money is buying the shares back from Joe Sucka in the accumulation phase. This is how the Wall Street game is played. Wash, rinse and repeat.

Note the high volume last October when the selloff occurred. The central bankers saved the day so the candlestick is green after they pushed the month higher with easy money. All the failures of the 10-mth and 12-mth MA's on the chart are stick-saves by the central bankers the latest in July with the Greece bailout that got everyone bulled-up again. It would be prudent for price to come down within the October candlestick zone to see how the volume compares. If price prints between 1970-2020 and volume is larger than October, there should be plenty of trouble ahead. If price tests the lower zone but volume is lighter than October stocks will likely recover for a couple-three months and adjust. 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.

No comments:

Post a Comment

Note: Only a member of this blog may post a comment.