Wednesday, October 7, 2015

SPX S&P 500 2-Hour Chart

The battle at the 1985-1988 resistance gauntlet discussed from the weekend to now remains in play. Yesterday, the SPX stabbed up through to print at 1992 (short purple line) but collapsed from 10 AM EST into the closing bell ending at 1980. S&P futures are up +13 and ready to send the SPX up to test the uber strong 1985-1988 resistance at the opening bell. The stakes are high since 1988 should lead to the 2002 resistance.

The red rising wedge, overbot stochastics and neggie d (short red lines for the indicators) yesterday create the mid-day spank down where the 1973 support held. The 100-week MA is 1975. Note, however, the MACD line is long and strong and wants to see a higher high in price again and the S&P futures point to that outcome occurring. When price prints at 1992 or higher after the bell, monitor the indicators to see if negative divergence prints (the purple lines in the margin). If so price will be spanked down again and likely back kiss the critical 1985-1988 area which would be support if this scenario plays out. The thinking is that the MACD line may not roll over with neggie d on that price high so price will want to come up once more which places the test of the 2002 R on the table. The important 50-day MA is 1998.52 call it 1999.

But the bears should not be discouraged. Bears may need to be patient today but prices should relax lower as the weekend approaches. Price violated the lower standard deviation band (pink) in late September so you knew that price would seek the middle band and perhaps the upper band to revert to the mean which occurs with price leaping to the upper band now and violating this boundary for the last four days. This helped create the mid-day spank down yesterday and sets the course for price to return to the middle band now at 1942 (same as the 20-day MA) and rising. The blue circle highlights a gap that will need filled at some point in the future and this is also where the critical 200 EMA on the 60-minute chart is at 1957; the positive cross above 1957 signals bullish markets for the hours and days ahead (see previous chart).

Thus, the projection is that the SPX will likely float up into the 1988-2002 zone today but roll over as soon as the MACD line goes neggie d which may be about 3 to 6 candlesticks in the future which is 6 to 12 trading hours. Thus, a market top may be on tap this afternoon or tomorrow. Then price will seek the lower support levels.

The 1985-1988 S/R gauntlet is key since, in general, bulls win big above 1988; bears win big under 1985. The BPSPX is on a market buy signal. The CPC put/call ratio is 0.93 not yet down to a complacent level that would help identify a near-term top. The CPCE put/call ratio is down to 0.68 and was 0.62 the day before. That low CPCE at 0.62 helped create the mid-day market top yesterday. So a market top is not likely until the CPCE drops under 0.62 and the CPC will need to fall below 0.82. Check these charts this evening.

Keybot the Quant remains long with a focus on chips, retail stocks and copper. Watch the bull-bear lines identified by the algorithm at SOX 618.34, RTH 75.58 and JJC 27.91. SOX is above creating market bullishness while RTH and JJC are under the level shown creating market negativity. Market bears need SOX under 618.34 or they got nothing. Market bulls need RTH above 75.58 and JJC above 27.91 to confirm a continuing rally in the broad stock market. As the stock market rallies watch to see what RTH and JJC does, if they do not turn bullish then stocks will roll over and retreat. If RTH and/or JJC turn bullish it is party time for more stock market upside and the SPX will target 2002 perhaps higher.

The SPX S/R brown lines shown above are 2019, 2011, 2002, 1988, 1986, 1985, 1978, 1973, 1965 and 1961 (see the SPX S/R missive on the weekend for the key levels). 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 11:27 AM:  The SPX tops at 1999.31 and all the indicators on the 2-hour chart turn neggie d including the MACD line so the spank down occurs. Price moved above the 50-day MA at 1997 but was smacked down unable to hold above. JJC turned bullish as described above for the Keybot algorithm so copper created the early strength. RTH was also trying to turn bullish and SOX was up big. Right now, both JJC and RTH return to the bear camp and SOX drops. Watch SOX 618.40, RTH 75.56 and JJC 27.96 as the bull-bear lines in the sand. The algo is constantly recalculating these values. SOX is above creating bullishness while RTH and JJC are below creating bearishness. This status quo will send stocks sideways. If SOX falls under 618.40 the stock market will take a leg lower. If RTH or JJC turn bullish, the stock market will rally. One of these three will flinch and it will tell you the market direction answer.

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