Tuesday, December 15, 2015

SPX S&P 500 Daily Chart

The bulls continue a rocket launch rally that began during the last hour of trading yesterday. Price violated the lower standard deviation band at 2020 so a move back to the middle band, the 20-day MA, at 2069, is in play. The green lines show the possie d that helped to bounce price as well as the oversold stoch's. The red lines are weak and bleak preferring to see lower lows in price going forward after the bounce.

The pink box shows that the downtrend in September was strong but petered out in early October. Then the upside rally trend was strong only for a couple days in early November and petered out. Now price staggers sideways like a drunk in Times Square on Saturday night with no firm trend in place. If the ADX moves above 25 as price moves higher the uptrend will be strong and the SPX will rally strongly higher.

The downward-sloping red channel is in play. The moving averages are converging sideways at 2062-2069. The critical 10 and 12-month MA's are at 2052-2053. The 50-week MA is 2062. Of course, the FOMC decision is tomorrow afternoon and will dictate the direction of all global markets. The expectation for SPX is for a move into the 2052-2069 zone, then likely a roll over back to the downside to honor of the the red lines that are weak and bleak wanting a lower low in price. After the Fed announcement pay attention to the red channel. If the announcement results in joy, the 2065-2075 area will be key. The price action obviously depends on the Fed tomorrow.

Using the critical moving averages listed, a strong resistance gauntlet exists at 2052-2069 is in play for all the marbles. The Fed decision will determine the winner. Bulls will rejoice if the SPX moves above 2069 since big gains are coming with a big rally finish to the year. Bears will celebrate if the SPX remains  under 2052 since this guarantees more downside ahead with stocks falling apart. A choppy battle of sideways confusion occurs at 2052-2069.

What is all this chatter about "oversold markets?" Talking heads are touting "oversold markets" this and "oversold markets" that. Keystone channels his inner Gary Coleman and asks, "Whatchu talkin' 'bout Willis?" Keystone does not see any oversold markets with the sole exception of a sliver of oversold behavior in the stochastics a couple days ago (mentioned above); that is it. In troubled times and market selloffs everyone turns into an armchair technical analyst. These are the same people that shun the technicals the rest of the time calling it voodoo. 

There are no oversold conditions on the weekly or monthly SPX charts. Comically, the stochastics on the weekly chart are actually coming off overbot conditions. Ditto the monthly chart with stoch's a hair from overbot. So all that talk about oversold this and that is phooey. One key thing to remember concerning oversold markets is that on rare occurrences stocks do not bounce but instead crash. That is right; when a market crashes it crashes from oversold levels; so those using the oversold conditions as an entry point for long trading promptly receive their head on a platter instead.

When everyone is walking around waving an oversold banner in the air and charts are actually oversold, they all may be dancing on the deck of the Titanic. Oversold conditions are typically an important trend change time back to the upside but in crash conditions, price goes into complete free fall instead. This is worth remembering as talking heads keep touting "oversold markets." They do not know oversold markets from shinola. Markets remain elevated today dancing through the 2044-2050 range. The big show takes place tomorrow; the epic Fed decision to perhaps raise rates for the first time in one decade.

During OpEx week, stocks are typically buoyant from a Tuesday low to a Wednesday high, and stocks are typically bullish heading into a Fed meeting so the bulls have the seasonality factors on their side and professional traders are taking advantage of this from late-day yesterday. The Fed decision is only about 26 hours away. 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 12:55 PM EST: The ink is barely dry on the comments above when the SPX spikes higher printing the HOD at 2053.87. The bulls attack the critical 2052-2053 resistance.

Note Added 7:27 PM EST:  The bears held the line at the critical 2052-2053 resistance discussed above. The battle continues tomorrow.

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