Tuesday, September 29, 2015

SPX S&P 500 2-Hour Chart Positive Divergence Lower Band Violation

Here is a look at the SPX 2-hour chart which was highlighted yesterday. Positive divergence was setting up and a bounce was expected but waves of bad news yesterday including oil plummeting, energy collapsing, commodities crumbling, biotech bludgeoned, high-yield bonds in trouble and the Saudi's pulling money from US funds, sends stocks lower.

The SPX continues to violate the lower pink band so a move back to the center band at 1922 is in play. Price came down and even though it did not test the 1867 August low directly, it was in the neighborhood and the indicators are positively sloped over that one-month period which is a positive for bulls. It is not officially positive divergence over the one-month period, however, since price did not make a lower low under 1867. This can still happen it all depends on the MACD line. Everybody and his brother are watching 1867. The cab driver said he is watching SPX 1867.

Yesterday the indicators slipped lower as the waves of bad news hit stocks. The tiny green lines show positive divergence that is bouncing stocks in the early going today but note that the MACD line remains a bit unconvinced of a recovery rally. The MACD line is flattening which is encouraging for the bulls. The expectation is that the MACD line should curl higher over the next candlestick or two (1 to 4 hours of trading time) which is now through 3 PM, say the closing bell, which should place a firm near-term bottom.

The high CPC and CPCE put/calls point towards a near-term bottom at hand along with the high TRIN Arms Index described yesterday and the excessive -1200 ticks from the TICK machine.

The expectation is for stocks to base today and stage a recovery rally targeting the key 1897, 1909, 1920 and strong 1924 resistance levels. The 1920-1924 area jives with the 20 MA at 1922 which is on the table due to the lower band violation. Reference the SPX S/R missive previously posted. The 1872-1878 is a strong support gauntlet and note how price dropped to 1876.34 and bounced; the gauntlet held.

The SPX appears ready to stage a recovery rally but watch the MACD line to make sure. Keybot the Quant remains short the market and the algo is tracking UTIL 569.68 as a key level. Remember, Keybot is designed to provide the smoothest path through the trading year. The 2-hour chart technical analysis above is for the shorter time frame. If utilities move above this level it will prove that the market bulls have the beginning stages of strength to take stocks higher. UTIL is at 566 remaining in the bear camp currently which will continue to create a weight on the broad market. Watch for UTIL 569.68 today. 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.

Note Added 1:32 PM EST: In the early afternoon, equities were trading dead flat but are beginning to ramp higher. The SPX is up 7 points to 1888. The strong S/R in this area is 1897, 1884 and 1878. UTIL is 566.70 under the 569.68 that the Keybot the Quant algorithm is tracking so bulls cannot gain upside traction. On the SPX 2-hour chart, the MACD line plays it coy, hinting at flattening which hints of confirming positive divergence especially with price printing matching lows over the last four 2-hour candlesticks. The expectation would be for stocks to start a recovery move higher today, for the near-term, but the bears keep applying pressure. Bulls need that MACD line on the 2-hour chart to start moving higher as well as the utilities to move higher.

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