Monday, July 4, 2016

SPX S&P 500 Monthly Chart Tight Standard Deviation Bands Forecast Huge Move Ahead

The tight standard deviation bands keep getting tighter. The final act of the grand Keynesian drama is about to play out in the weeks and months ahead. The bands (purple arrows) have not been this tight since the 2008 collapse which was led by the banks falling apart early that year. That it is interesting. Are the banks falling apart now?

Tight bands do not predict direction, however, they do forecast a quick sharp and strong move. Like squeezing a tube of toothpaste you increase the pressure (tighter bands) more and more, a bit more, a little more, and boom, the toothpaste flies out but you do not know which direction, until it lands on the inverted hair brush. By, say the Fall, the SPX will likely either be way up at 2300, or, way low in the 1700 or 1800's. The red lines show neggie d remaining in place. As price continues to poke around at new highs, the indicators are lackluster and very tired.

The big wildcard is the central bankers. These money Maji's can create higher stock markets from whole cloth. The BOE saved the FTSE Index last week with Governor Carney promising stimulus this summer and also reducing capital requirements and regulations on banks this week. This morning, the PBOC hints at more stimulus as China data remains lackluster. The ECB will be pumping, Chair Yellen is the Queen of the Doves at the Fed, and BOJ Governor Kuroda has gone completely mad printing money like a crazy man. The BOJ is buying stocks, bonds, ETF's; they are imposing negative rates, it is a mess. Does anyone actually think that will end well? Pause for laughter.

So the expectation would be the sharp move down but you cannot underestimate the power of the central bankers. The 10 MA is 2050 and 12 MA is 2033. The 10 is above the 12 which is a feather in the market bull's cap. Bears would need price to come down to 2050 and lower pronto. The 12 MA is a key cyclical market signal indicating that the bulls are in charge for the weeks and months ahead. If 2032-2033 fails, a trap-door would open in the stock market and it would collapse lower. The brown circles show how the selling volume this year far outpaces the buying volume. The prior brown circles are all distribution months where the smart money is handing over stock shares to the dumb money.

There is something epic about to happen in the stock market. Perhaps the world we know now will nowhere be the same come the end of the year. The tight bands are awesome; something important is about to take place. Fasten your seat belt since there is going to be some craziness from now into the Fall. 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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