Thursday, March 31, 2016

SPX S&P 500 Daily Chart Overbot Rising Wedge Negative Divergence Setting Up

As mentioned a few days ago, the SPX daily chart was in the process of topping but needed a few more days to set up. It is there now as the negative divergence shows although today has to play out as explained below. About a week ago, it was thought that the 2-hour chart would create a pullback and then prices would come back up to satisfy the daily chart; which essentially occurs but a stronger selloff was expected. Each times stock began to move lower on the 2-hour chart from negative divergence, the central bankers intervened to maintain buoyancy  in the stock market.

As this central banker drama plays out, the daily chart indicators line up with neggie d (red lines) so a smack down is on tap. However, watch that sneaky RSI on the verge of the overbot level (tiny purple circle). If the RSI pokes above the 70% level that will delay the market top by a day or three. If the RSI remains flat as is compared to the prior high about a week prior, then the bears will be all systems go for downside. Watch the MACD cross since a negative cross will confirm the beginning of a selloff in stocks. The dark red rising wedge is ominous.

Price tagged the upper standard deviation line so a move back to the middle band at 2022 and rising is in play. If the RSI pokes higher as mentioned then price will seek the upper band more substantively at 2074 before rolling over. Stocks are long overdue for a pull back and have been stick-saved over the last three weeks by a Draghi pump, then a Yellen pump, then positive seasonality around the Easter holiday, then another Yellen pump on Tuesday. The central bankers are sick; they have created a Frankenstein market. They realize this but they no longer know what to do except pretend that they know what they are doing.

S&P futures were down -4 but are now +1 about 90 minutes ahead of the opening bell. Watch the RSI to see if the top occurs today or if it will be delayed until Monday. 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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