Friday, October 9, 2015

SPX S&P 500 2-Hour Chart

We were watching the 2-hour chart to find the market top a couple days ago when the MACD line rolled over--but--not so much. The tiny brown lines for the indicators show the MACD with that hair of a downside which is negative divergence as price printed the new high (see previous chart). Price fell as the long red candlestick shows but then recovered again due to what turns out to be more of a flat to ever-so-slightly rising MACD line. Add in the Federal Reserve dovishness and the bulls are off and running again. Now what?

Same set up is occurring. Bears need the MACD line to roll over to identify the near-term market top. The blue lines for the histogram, overbot stochasics and money flow are in the bear camp with neggie d wanting price to roll over and come down. The MACD line remains long and strong (green line). RSI is flat. So, price may retreat for a candlestick (2 hours of trading time) then come back up to the highs again due to the long and strong MACD line. At that time the indicators should be all negatively diverged, you will have to monitor the RSI as well, and that should provide the price top. Say 1 to 3 candlesticks so the market top would be projected anytime from now through Monday morning.

The upper band was violated (pink) so price needs to back kiss the middle band now at 1986 and rising. The Fed helped provide a day or two more of go juice but the stock market should roll over either this afternoon or first thing next week. This should be considered in reference to any recent gains on long trades or if there was a desire to unload any longs on the rebound move in stocks.

The HOD is 2020.13 thus far so watch for price to come back up to here and the MACD line to go neggie d and you will know the top is in. The CPC and CPCE put/call ratios have not come down so this hints that the equity rally can continue for another day or so. Ideally, a market top aligns with low put/call ratios and that gives you strong confidence that it is a market top. 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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