Friday, March 18, 2016

SPX S&P 500 2-Hour Chart Rising Wedge Overbot Negative Divergence Upper Band Violation

The bulls continue running with stocks up at lofty levels during the last hour of trading for the week. Traders continue celebrating Fed Chair Yellen, Queen of the Doves. They dip a cup into the Fed punchbowl and stagger around buying stocks with reckless abandon. Everyone guarantees more upside from here; the all-clear has sounded. Rejoice! The train has left the station and traders are running after it for fear of missing out. However, a party atmosphere typically ends in a hangover and regret.

Maybe stocks head higher, especially if the central bankers keep pumping. Today is Quadruple Witching OpEx with high volume and much of this activity is providing a boost to stocks late-day. However, the technicals above say the top is in. The red lines show the riding wedge patterns. The SPX is overbot and the indicators are universally negatively diverged in the one-month and near-term few-candlestick time frame. The MACD line (tiny green line) has one sliver of juice left in it and price may or may not choose to use it, if so, the SPX may need one more candlestick to peak out (2 hours); this would place the SPX on Monday morning.

Price has violated the upper band so the middle band at 2026 (pink) is in play and the lower band at 1997; both are rising. The critical 12-month MA is at 2031 and it is so important that price will need to back kiss this level to show it respect. The SPX above the 12-month MA says the stock market is in a cyclical (weeks and months) bull pattern. Market bears need to push SPX under 2031 as soon as possible or they are toast over the intermediate term. The 2023 level is strong price support (see the SPX S/R missive) so marrying this with the middle band and 12-mth MA provides an initial downside target at 2023-2031. Stocks are in a joyous mood right now so it is interesting to see a sick chart like above while everyone is celebrating with euphoric cheers.

The purple lines show a prior top, remember that about a week ago? Price started leaking lower due to the neggie d but in comes ECB President Draghi to save the day in the purple circle. The chart absorbs this joy then resets with the brown lines. Overbot conditions, a rising wedge and neggie d spank it down again but this time Fed Chair Yellen flies in on a white dove to save the day in the brown circle. So that is where we are now. Are the bulls out of juice like the chart says or will the central bankers keep finding ways to pump stocks higher?

It is prudent to ditch any longs you are not married to and bring on downside protection (for very short term trading). The low CPC put/call is ominous. The CPC and CPCE charts will be interesting this evening. Considering the uber low CPC, it would not be surprising to see the S&P 500 drop from 30 to 100 handles over the coming days say week or two. The SPX weekly chart indicators are long and strong so on the weekly basis price would be expected to recover back to current levels after the potential selloff occurs. Comically, price has to peak out first and it is currently like waiting for Godot. The SPX is up 10 points, +0.5%, to 2051 at 3:25 PM EST with 35 minutes of trading remaining. Keystone brings on some more index shorts. 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 Saturday Morning, 3/19/16: The SPX ends the Friday session up 9 points, +0.4%, to 2049.58. HOD 2052.36. The CPCE put/call collapses to join the CPC with uber lows signalling a near-term market top at hand. It may have already printed at 2052.

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