Wednesday, November 11, 2015

SPX S&P 500 Monthly Chart Standard Deviation Bands to Squeeze Out Epic Market Move

The tight pink standard deviations bands will squeeze out a huge market move beginning at anytime over the next couple months. The move may be 200 or 300 handles over a multi-month time frame. The band have not been this tight in a decade. We are at the cusp of something very special and historic occurring in the stock market. Tight bands, however, do not predict direction; they only predict that the move will be powerful in one direction or the other.

Keystone described the red rising wedge, overbot conditions and negative divergence this year identifying the top in the markets, which occurred. The central bankers will not give up the fight and entered in force in October to pump markets higher. The Fed, ECB, BOJ and PBOC are printing money like madmen and successfully creating a strong recovery. The indicators are lagging the price move by a substantial amount but that is not negative divergence unless price moves higher to the all-time record high at 2135 and higher. The indicators were weak and bleak wanting to see lower lows in price after any bounce in this monthly time frame but the central bankers collude and override all else and create the recent joy.

The blue circles show higher selling volumes on the months after the rises in prices. This is pure distribution occurring where the talking heads keep hyping the markets on television to get Joe Retail, Ma and Pa Kettle, and dear ole blue-haired Aunt Martha, all bulled up and buying stocks. The blue circles show the smart money dumping off stocks to the bag holding sucka's.

The chart favors the bearish outcome. Remember, the collapses from rising wedges can be quite dramatic and the flush may be ready to begin at anytime over the coming weeks and will likely continue for several months perhaps a year. The 18-year stock cycle (the most reliable cycle) also favors this bearish outcome since markets are in a secular bear from 2000-2018. It is typical to see strong cyclical rallies inside a secular bear such as the 2003-2007 rally and the current rally from 2009 to present. With only about 3 years remaining in the secular bear it would not be surprising at all to see the stock market print say 3 negative years over the next 4 years.

Price also remains above the 20-mth MA above the 50 above the 200 so this favors a mean reversion. It is hard to imagine that price would catapult higher for the months ahead but these days you never know. The central bankers are immensely powerful as shown by the huge rise in stocks over the last 6-1/2 years. Will Draghi's ECB QE money bazooka be so powerful on 12/3/15 and then every month after to create the explosion higher? That is also difficult to buy since the bull party would be ongoing for 7 years and confidence is eroding in the central bankers as global deflation persists.

Something huge is about to happen, the expectation is for a big flush lower to begin at anytime over the next few weeks. The move would easily take the SPX into the 1500-1700 range during 2016. The previously posted weekly chart shows some bull juice available for November but after that, stocks may top out and roll over and the world may become very bleak. 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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