Friday, August 12, 2016

SPX S&P 500 Daily Chart Tight Band Squeeze Forecasts Huge Move At Hand

Here is an update of the daily chart which was popular a couple days ago. Those funky tight standard deviation bands (pink) are comical looking. Something very, very big is about to happen. Tight bands do not forecast direction; they only dictate that a large magnitude move will occur. Price is trying to break out higher but the red lines show firm neggie d across the near term few-day time frame and across the one-month and multi-month time frames as well. There is no more oomph available to move price higher. Price is elevated above the moving average lines requiring a mean reversion lower.

The RSI did not make it into overbot territory and the money flow may try to eke out one more day of joy but the conclusion is that the S&P 500 needs to sell off from here now. The only thing that can save it is good news, such as a central banker announcement of more stimulus. The important Retail Sales number is imminent as well as other economic data so this may play a role. But barring anything earth-shattering, the expectation would be for a down move and considering the tight band squeeze, it may be quite a sight. Perhaps there will be a major news event on the weekend; good or bad. If the ECB, politicians, and investment banks announce a bailout deal for Italian banks that could catapult stocks higher.

If the technicals and negative divergence wins out as would be expected, the downside gap level at 2168 is support, also the 20-day MA at 2171, the bottom of the gap at 2164, then down to that key support and gap at 2158-ish. The tight bands are ready to squeeze out big excitement either today or Monday. Down is the expectation but the central bankers are always lurking in the bushes ready to step in to save the day. 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.

Note Added Saturday Morning, 8/13/16: The SPX dips 2 points in the Friday session. The bulls are strong. Traders are likely giving the stock market the benefit of the doubt through the weekend. The Italian bank bailout negotiations have been ongoing for many weeks and months so perhaps an announcement will occur which would send stocks higher. The central bankers are the market. Traders may also be willing to hold tight through the weekend since the bad Chinese economic data Friday may push the PBOC to provide stimulus which will pump stocks higher. Barring these two events or other central banker joy, the technicals should take over and send stocks south.

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