Tuesday, October 13, 2015

SPX S&P 500 2-Hour Chart Overbot Negative Divergence

Keystone posted the SPX 2-hour, daily and weekly charts on the weekend so scroll back or type 'SPX' in the search box at the right to bring up those charts. The idea on the 2-hour chart was to wait for the negative divergence to print (red lines) to know the market near-term top is in. From Friday to now it is like waiting for Godot. The new moon peaked last evening and stocks are typically weak moving through the new moon about 65% of the time. Price peaked at 2019 yesterday and printed at 2006 this morning. But the bulls recover.

The SPX remains elevated but the 2-hour chart is negatively diverged wanting to see a roll over to the downside. The negative MACD cross occurs. It is an interesting and a tricky top since price is staggering sideways showing a strong battle between bulls and bears.

The VIX is at 16.50 under its critical 200-day MA at 16.65 which is a market signal for bullish versus bearish markets ahead. The VIX closed under the 200-day MA yesterday for the first time since mid-August nearly two months ago. VIX is 15 pennies under the 200 so watch this as a key market gauge. Market bears will win and roll the SPX over to the downside with the neggie d if VIX moves above 16.65. The bulls will keep ruining the bears day and extend the near-term market top if VIX stays under 16.65.

The expectation is for equities to sell off and retreat from the 11-day rally due to the negative divergence. Price continues to need to touch the middle standard deviation band at 2005 and rising since the upper band was violated.

During OpEx week a Tuesday low typically leads to a Wednesday high so this is a wrench in the bear case above. However, balancing this seasonality factor against the negative divergence on the chart the chart should carry more clout. Perhaps a big selloff occurs today to create a deep low into the closing bell today? Or perhaps softness today and tomorrow morning may lead into a huge upside rally tomorrow afternoon. Just some scenarios to consider. For now, things should be kept simple and the idea is that stocks should roll over due to the neggie d. 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 12:46 PM EST: The VIX is at 16.62 and its 200-day MA is 16.65. This is for all the marbles. Market bears need three more pennies for VIX and the neggie d in the chart above should kick into gear. The bulls are fighting to keep volatility, the VIX, under 16.65. Bingo. In the time it took to write this message VIX is now at 16.72. The bears are growling. Will it continue?

Note Added 12:51 PM EST: The VIX is 16.83 above its 200-day MA at 16.65. SPX 2013.

Note Added 1:04 PM EST: The VIX is 17.03 above the 17 level. SPX 2011. UTIL is at 587.61 and its 50-week MA is at 589.22 so the bears continue to apply pressure. Bulls need UTIL above the 50-week to receive upside market juice (reference previous chart).

Note Added 8:56 PM EST: The neggie d spankdown occurs. SPX LOD 2001.78. SPX ends the session at 2003.69. VIX 17.67. The selloff is fishy. The SPX daily chart shows a long and strong MACD line which wants another higher high in price in the days ahead. The CPCE put/call ratio is at 0.80 which is more consistent with stocks at a bottom rather than a top so something does not smell quite right. The SPX 2-hour chart is moving lower and the indicators are weak and bleak so there should be at least several hours of market weakness ahead for Wednesday.

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