Tuesday, August 2, 2016

SPX (S&P 500) Daily Chart Expansion Pattern Overbot Negative Divergence New All-Time High 2178.29

The daily chart hinted for a few days of buoyancy and here we are a few days later remaining in the tight sideways range, the tightest such range in decades, and printing another record all time high in history at 2178.29.

The expansion, or megaphone, pattern remains in play with price teasing along the upper boundary. Bears must push price lower now or never. The red lines show that indicators are in universal negative divergence across the multi-month period and over the near-term couple-week period. Price does not have any more upside oomph available. Stochastics are overbot. The MACD cross turns negative. Price is elevated above the moving averages and needs a mean reversion lower. All these parameters are bearish.

The ADX shows that the selling to begin the year was a strong trend lower, until late February, when the central bankers succeeded once again in goosing stocks higher and not permitting markets to correct. The ADX remains subdued for the last few months so the entire rally from February to present, that anyone would say is strong and robust, actually is not. The ADX shows that the entire uptrend since February is not a strong trend higher (the ADX should be at 30 or 40 or higher considering the long rally). This creates a dark cloud over equities.

The little circles on volume show distribution days over the last month. When Ma and Pa Kettle become excited over the bump higher in stocks on one day, the next day they invest and the smart money is dumping shares to these bagholders. Isn't it a beautiful sight, well, if you are rich it is. Aunt Edna and Uncle Frank, that work part time at the senior center to supplement their social security, just pulled their entire life savings out of the bank yesterday and bought utility and dividend stocks like the nice gentlemen on tv advised.

The expectation is for a pull back in this daily time frame but as always, it only depends if the central bankers allow the retreat. The Bank of England is on tap on Thursday and Governor Carney already has said he will provide boatloads of easy money as well as reduce banking regulations to goose the stock market and economy so global traders may be joyous on Thursday. Therefore, if the bears have a window it would be now, over the next couple days. The new moon peaks at 1:46 PM EST today, in about 5-1/2 hours. Stocks are usually (about 65% of the time) bearish moving through the new moon so the bears have a sliver of seasonality on their side. If stocks roll over to the downside and trend lower, the lower trend line of the expansion pattern places the SPX in the1910-1970 area in September-October. 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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