Sunday, December 11, 2016

SPX S&P 500 Daily Chart; Upward-Sloping Channel; Overbot; Negative Divergence Developing; Upper Band Violation

The bulls keep driving stocks higher. The ECB's QE extension last week, providing more easy money through next year, creates more upside joy. Price has violated the upper band so the middle band, the 20-day MA at 2201, and rising, needs back kissed. Note that the longest period that price went without a back test of the 20-day was back in July for about one month. Price is now nearly 1-1/2 months along without back kissing the 20. Price is above the moving averages and the upper band so a mean reversion lower is desperately needed.

The red lines show negative divergence across  the multi-month period for MACD, histogram and stochastics. The neggie d is also in play over the last month as price makes a new higher high except for the RSI and MACD that remain long and strong. Price has some momo behind it these days. The RSI and stochastics are overbot. The chart wants a pull back right away but the RSI and MACD say that price wants to come back up after a 1 or 3 day pullback.

The expectation for a pull back right now matches the 2-hour chart that is about to roll over as soon as the MACD goes neggie d. The SPX weekly and monthly charts are not enthusiastic about the intermediate and longer term; the charts are negatively diverged so price is out of gas contrary to the broad majority consensus on Wall Street that proclaim the stock market rally will continue through next year. The weekly and monthly charts currently point to a rocky road ahead for stocks in those time frames.

Once the daily chart plays out with a top in the coming days or week or so, that may do it for the stock market indexes for the next few weeks and months. The expectation is for weakness for a day or two, then back up for a day or two, then, if the RSI and MACD go neggie d, a more significant top is in. Sometimes the MACD will extend the jogging action for another couple days to allow the MACD to go neggie d and identify the top. So perhaps down Monday-Tuesday, up into Wednesday, down Thursday-Friday. Another recovery maybe Friday or Monday, 12/19/16 and then perhaps a major roll over in stocks coming next week. When price prints a higher high, and the RSI and MACD lines flatten and slope negative (negative divergence) in the chart above, that will tell you the top is in for the near-term. In the VST (very short term; hours), a top and pull back is expected. 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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