Sunday, August 23, 2015

SPX S&P 500 2-Hour Chart

Here is the 2-hour chart updated from Friday. The green expansion pattern played out but instead of price bouncing at the lower rail at 2025-ish, it failed. Indiscriminate selling was taking place on Friday. Traders ran in to buy put protection at any price sending the CPC and CPCE put/call ratio's to uber panic and fear levels (where a market bottom typically occurs). Traders threw out the baby with the bathwater and even threw out the bathtub. Several investors jumped from windows. Luckily the windows were on the ground floor.

The indicators did not set up with positive divergence so a recovery in price did not occur. The stochastics are positively diverged (green lines) so that indicates the need for a bounce in price right now, in this 2-hour candlestick time frame, but the other indicators are weak and bleak wanting to see a lower low in price after any bounce occurs. The RSI is in the cellar so that simply needs a dead-cat bounce like the stoch's since it cannot fall any lower.

The chart needs from two to four candlesticks of time for the indicators to positively diverge and plant a firm bottom for a recovery rally; this is from 4 to 8 hours of trading time so a bottom can occur anytime Monday into Tuesday morning. China dictates global stock market action to begin the week. If the PBOC provides stimulus to goose the SSEC higher, the week will begin happy, if not, the week will begin sad. If the PBOC central banker intervention occurs that will likely override the chart indicators above and a 'V' bottom will occur with price perhaps spiking wildly and strongly higher; probably back to 2K and higher lickety-split.

The elevated VIX near 30 says the stock market point moves will remains very large both intraday and day to day. So look for 15 to 40 point erratic moves in the SPX and moves up and down in the Dow Industrials of 200, 300, or more points should be common going forward. It should be quite a ride in the week ahead. The expectation would be for stabilization in here at 1960-1980 and a relief rally back to 2000-2030. Watch for possie d on the indicators to know the bottom is in place. Remember, China may announce stimulus at anytime to goose their markets which will likely create an immediate rally. 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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