Monday, March 7, 2016

SPX S&P 500 2-Hour Chart

Here is the SPX 2-hour chart which was highlighted late last week. The red rising wedge is ominous. Ditto the negative divergence for the indicators (red lines). Also the overbot conditions. The NYMO is over 100 and CPC and CPCE put/calls at uber lows signaling a near-term top at anytime. Stocks are typically weak moving through the new moon which is tomorrow evening. All this negativity and what happens? Stocks are holding up refusing to collapse.

The chart is bearish as stated and the collapses from rising wedges can be quite dramatic. There is really no compelling reason for price to come back up to the 2009 high from Friday but you have to leave it on the table. Price violated the upper standard deviation band again so a move to the middle band, at a minimum, at 1979 is on the table. The lower band at 1941 is also on the table.

The chart is negative from Thursday afternoon to present and the three brown circles show how the downside is prevented thus far. Oil. On Thursday, the SPX spurted higher with the jump in oil prices. It is as if the central bankers found a new toy to play with knowing if they can goose oil they can keep stocks elevated. On Friday, after the jobs report, stocks were shaky and began selling off but oil jumped over +4% a big rally and bingo, stocks rallied and the bears were punched in the face again.

Today, to begin the new week of trading, futures were weak and stocks begin on the downside only to see oil catapult over +3% higher with Brent tagging 40. This creates buoyancy in the stock market and prevents the bears from carrying out their nefarious deeds as described in the first paragraph. The expectation remains that stocks should top out at any time and begin selling off. The 1985-1988 level is formidable support (see the SPX S/R missive previously posted), and the middle band target at 1979 is moving higher into this area so there may be a big fight at 1985-1988 on tap. Considering the uber complacency with the low put/calls and the multi-year high in the NYMO, the expectation would be that 1985 would fail.

Keybot the Quant algorithm remains long, however, so a flush lower may be a quick and short-lived move down with an immediate 'V' bottom and recovery higher. The potential downside will only  have legs if volatility moves higher and banks move lower. The coming hours and days may prove very interesting. Keystone is holding index shorts purchased late last week (for very short term trading) and will add to them if the SPX floats higher. 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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