Thursday, January 14, 2016

SPX 2-Hour Chart

Stocks continue a wild ride in the new year. The SPX 2-hour chart has been interesting to watch. Price fell down through that first falling wedge so a bottom was near. Put/calls were high, VIX was high, the NYMO was in negative territory, so things were lining up for a bounce in equities and a couple of fits and starts occur, however, the red lines show weak and bleak RSI and MACD lines that needed to positively diverge before the coast was clear. Remember waiting for the MACD line to turn possie d was like waiting for Godot. Well, Godot finally did arrive.

A bottom is placed 13 candlesticks ago, which is 24-26 hours of trading, which is earlier this week, so it looked like the bulls would mount a recovery rally. They do but stocks remains choppy and then roll over when oil price rolls over in Wednesday trading. When stocks bounced, all indicators were positively diverged so there was no reason for price to come back down for a lower low. But it did. This is due to the bottom falling out in oil prices with both West Texas and Brent crude dropping under 30. That placed the fear of Jesus in traders that hit the sell button first and plan on asking questions later.

So the SPX comes back down for a new low due to the oil news-driven event. Price prints a low at 1879 and all indicators are again lined up with positive divergence so another bounce is on tap and barring anymore negative news a rally should occur, and it occurs today. The rally should continue unless another negative news event occurs or if oil rolls over again.

Price violated the lower pink standard deviation band and ran up to the middle band, then the next price collapse sent price back down for another lower band violation so the middle band was in play again and occurs today. The Friday session is important since price will bounce or die from the middle band which is also the 20-day MA at 1923. If price elevates a few handles above 1924, the SPX will then seek the upper band now at 1960 and falling. Note that price has not touched the upper standard deviation band since mid-December so this will need to occur soon.

Price is mean reverting higher due to being extended under the moving average lines. The two price tops connected by the short green line about 8 to 12 candlesticks ago shows a higher high in price and all indicators sloping higher with a long and strong profile. Thus, after any pullback, higher highs in price would be expected.

Referencing Keystone's SPX S/R data, the most important support and resistance levels are 1985-1988 (a very strong ceiling), 1982, 1978, 1973, 1970, 1968, 1965, 1964, 1961, 1958, 1951, 1949, 1942-1943, 1936-1937, 1928, 1924, 1920, 1910-1912, 1897, 1891 and 1884-1885. That 1924 resistance is key; bulls wil likely run higher if it is taken out to the upside. The SPX starts the Friday session at 1922.

Look for a potential inverted H&S to form with head at the 1879 low and neck line at the strong 1942-1943 R. Thus, a 63-point difference identifies 2005 as the upside target for the inverted H&S should a right shoulder form and then if price busts up through the 1942-1943 level. Simply keep this concept in mind moving into next week since this would need a couple-three days to develop. 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 6:27 AM EST Friday Morning, 1/15/16: Negative news occurs in spades overnight. China's SSEC, the Shanghai Index, mini-crashes -3.5%. Ongoing China weakness sends commodities into a tailspin. Oil collapses sending US futures down the rabbit hole. As oil goes, so goes the markets. WTIC oil is down -5% to 29.60 Brent oil is down -3.8% to 29.70. Both collapsed under 30 just before 4 AM EST and US futures and European indexes slide down the rabbit hole. The negativity in oil may simply be another bottom test, the charts will have to be studied. The Russian ruble is collapsing towards 78. Mexican peso at 18. Canadian dollar hits 1.45. World currency turmoil is creating further angst. The US dollar index does not move higher instead bumps along sideways between 98.6 and 99.3 for the last three days. Dollar bulls win big above 99.3 while dollar bears win big under 98.6. Euro is sticky at 1.09. With US futures in the tank, S&P's -32, it looks like the SPX may want to drop to test that uber strong 1897 support. Under 1897, the 1891 test of support is next then 1884-1885.

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