Wednesday, January 6, 2016

SPX S&P 500 2-Hour Chart Downward-Sloping Channel Oversold Falling Wedge Positive Divergence

Here is an update for the SPX 2-hour chart. The idea was to wait for the MACD to positively diverge to signal the all-clear for a sustainable rally. When the stock market rallied today intraday you saw that the MACD line on the 2-hour chart continued to point downward, weak and bleak. You knew that price wanted to come back down again for another look at the lows, and in the afternoon, it did.

Typically, when the other indicators such as RSI, histogram, stochastics and money flow are positively diverged, the MACD line will turn possie d when price comes down to retest a low. But look at the chart above; what do you see? Yep, the MACD line remains weak and bleak so price needs to come back down again. If the price jogs up, then back down that is at least one to three candlesticks of time needed to print another low which is 2 to 6 hours of trading time, thus, the stock market should place a near-term bottom tomorrow (Thursday). You have to wait for the MACD line to turn possie d to know the coast is clear for the long side.

The only other overriding factor would be very positive news overnight, like a central bank printing more money, which would immediately launch the SPX rather than bring her back down to satisfy the MACD as discussed above. Note that the MACD line is positively diverged across the 7-week time frame but it is only that little red line that is causing the bulls problems and providing joy for bears. A near-term market bottom is at hand.

Price is at the lower rail of the downward-sloping channel which is also a logical place for a bounce. Interestingly, with all the selling and what seemed like negativity today in the stock market, the CPC and CPCE put/call ratios barely budged; they are not in panic territory as yet so more stock market downside remains on the table. Perhaps a final flush lower will occur tomorrow which will spike the put/calls to verify a firm near-term bottom. If stocks rally but the put/calls do not spike higher, stocks will sell off again going forward since there is not enough fear and panic to create a bottom.

A new moon occurs on Saturday night and stocks are typically bearish moving through the new moon. New money is typically put to work to begin the year that is why when this market reverses, the rally can rip off the face of anyone that is short. The MACD line tells the story. If the SPX can play around sideways at the openig bell on Thursday and the MACD line can flatten that is good enough for government work and a recovery rally should begin for stocks. A strong rally will not be confirmed until a strong bottom is put in place and that will not occur until the CPC and CPCE put/call ratios spike strongly higher.

SPX S/R is 2046, 2019, 2011, 2002, 1985-1988, 1982, 1978, 1973, 1965, 1961 and 1951. Note how price was fighting at the strong 1985-1988 support gauntlet today. The LOD is 1979.05 so the 1978 support held on Wednesday. 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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