Monday, March 28, 2016

SPX S&P 500 Daily Chart

There are many story lines occurring on the daily chart. Keystone has previously described the blue W pattern a  few times and it turns out to be textbook. The height of the W is 110 points so the target is 2050 (1940+110) if price breaks up and out at 1940 which occurs. W's are very strong when they are under both the 50 and 200-day MA's, strong if under at least one of these critical moving averages and only somewhat strong if the top of the W pattern is intertwined with the 50 and 200-day MA's. If you play a W that is somewhat strong you may want to cash in the long play before the upside target whereas a W pattern like above you are relatively certain that price will print at the target, which it did.

As price moves higher it forms an ominous red rising wedge; the collapses from rising wedges can be quite dramatic. It has been tough for bears to gain downside traction with the goofy calendar since over the last couple weeks, the ECB and Fed meetings occur and Easter holiday which help keep stocks elevated.

The candlestick today show bulls and bears fighting it out and price ending the day exactly in the middle so it is a draw. The critical 12-month MA is at 2030 and all Hades would break loose if this fails. The 50-week MA is also at 2030Bulls are fine above 2030. Bears rule the markets under 2030. Price is at 2037.

Price has not yet back kissed the 200-day MA at 2017 so this is on the table. The peak in price last Tuesday comes with negative divergence (red lines) which wants a spank down which occurs. The RSI and MACD line are dead flat as the higher high in price occurs so you do have to give the path forward to the bears, however, the momentum for 6 weeks may provide enough oomph to bring price up a bit more before rolling over. Keep an eye on the MACD cross to see if it occurs (black line under purple line).

The pink box verifies that the downside move in the S&P 500 was a strong downward trend in January into February but it ran out of gas when the ADX dropped under 25-ish in late February. That is when you knew the strong downtrend in price had ended. Note that after the wild upside orgy since 2/11/16, the ADX is unimpressed at 22 so the robust upside move in stocks is not a strong uptrend. Market bulls will rejoice if the ADX moves above 25 and stays above since it guarantees that stocks will continue higher to probably print new record highs. Market bears must keep the ADX under 25 and stocks will roll over and begin selling off.

The expectation is for stocks to sell off in this daily time frame. The CPC and CPCE put/calls are coming back down again indicating ongoing market complacency which occurs for market tops. Thus, stocks will either begin leaking lower tomorrow and visit 2011-2023 for starters, or, may remain elevated floating a bit higher for a day or three, but this will result in a roll over to the downside immediately thereafter. As long as the thin brown lines hold if price makes a matching high, the neggie d will spank markets lower.

Bears would be best off for price to simply fill that sliver of a gap on the upside at 2060-ish. This would button-up all upside gaps and open the door for extended long term market weakness. There are no other gaps to fill above. On the downside, there are a few juicy gaps at 1193-ish, 1898-ish and 1870-ish that will need filled at some point forward (little circles).

So the forecast is negative for the chart above and in the daily time frame for the days ahead say into the first week of April, however, the SPX weekly chart indicators remain long and strong. Thus, stocks are either topped out now or will so in the coming couple days, and then drop to 2011-2023, then likely a test of 2002 which will decide if the 2K level fails. If so, that gap fill at 1990-1997 will be filled.

After the quick downside move, stocks should recover say during the week of 4/11/16 due to the weekly chart and come back up again for matching perhaps higher highs. That may be when the gap fill at 2060 occurs. Once the weekly chart indicators roll over with neggie d probably in mid to late April, the expectation is that the stock market likely rolls over for very extended downside ahead. But it is best to take things, like life, one day at a time. So nimble shorts may be prudent for the days ahead but you do not want to out live your welcome perhaps flipping long early April then setting up short again as the weekly chart indicators form negative divergence. Of course the path ahead will be modified as necessary depending on how the charts progress.

Key price support and resistance levels are; 2079, 2071, 2067, 2061, 2046, 2038-2040, 2032, 2017-2023, 2011, 2002, 1997, 1993 and 1985-1988. 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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