Sunday, July 31, 2016

SPX (S&P 500) Monthly Chart Tight Standard Deviation Bands

The monthly charts receive a new data point on Friday since July ends. August trading begins Monday morning. The pink arrows show the ongoing tight band squeeze which will send equities strongly higher, or lower. Tight  bands only tell you that a large magnitude move is at hand, on the monthly basis, but do not dictate direction. The SPX is testing the top band at 2183. All-time record high from last week is 2177The bears must stop the upside move during August, otherwise the stock market may accelerate higher in September and October as per the tight band squeeze. Once the top band is touched at 2183 the middle band at 2052, and moving sideways, is in play. If bears can send stocks lower in August starting a reversal, the tight bands would squeeze price dramatically south. There is likely something epic on tap over the next couple months.

The red lines for the indicators show the neggie d from the October 2007 top to the May 2015 top and a spankdown would be expected, which occurs, but it is paltry over the last year; the central bankers are powerful.

The ominous red rising wedge lingers on the monthly chart wanting to extract its pound of flesh but the central bankers keep printing money refusing to let stocks adjust lower. The collapses from falling wedges are typically very dramatic and extreme. That pullback over the last year is only a pimple on the bear's butt. The ominous wedge pattern forecasts that a move to 1000-1500 would not at all be surprising over the next couple years.

The red lines also show negative divergence since the May 2015 top to present. Since the S&P 500 has printed a new all-time high at 2177 last week, above the May 2015 top, the indicators can be assessed, and each remains in negative divergence (the indicator is sloping down (negatively) while price is making new highs; this signals that price is running out of oomph). 

Over the short term, the last three months, the short green lines for RSI and MACD show a slight long and strong bias so the bulls may be able to keep stocks elevated for a month or two before the firm longer term neggie d overtakes the index. Stochastics are overbot and really have no further upside room.

The blue circle shows the textbook Tweezer Bottom Keystone has mentioned in the past. That marked the February low. The central bankers promised loads of easy money which sent markets higher prohibiting a further correction lower for stocks. The purple circle shows where the Brexit vote was tanking global markets but the BOE jumped in promising easy money for as far as the eye can see and global stocks never looked back galloping to new all-time highs riding the strong central banker winning horse; a horse that is always in the winner's circle.

The brown circle shows that the strongest volume period over the last five years is earlier this year during the stock market selloff. Price likely needs to come back down to test this price area to see how the volume will stack up. Note that new highs are made with price on volume that is only 75% of the selling volume earlier this year. If the rally had strong legs, you would think that the volume would be far greater.

The bears have the edge on the monthly (long term) basis despite the all-time highs occurring. Bulls have some near-term (a few weeks maybe a month or two max) mojo due to central banker joy. Watch the price behavior at the upper pink band. A close above 2180 would be important since Keystone's 80/20 rule says 8's lead to 2's so above 2180 should lead to above 2220. If price stays below 2180, that may hint that stocks will roll over. So in the near-term, pay attention to see if a close occurs above 2180, or not. 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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