Sunday, December 4, 2016

SPX S&P 500 Monthly Chart; Overbot; Rising Wedge; Negative Divergence

November ended last Wednesday, 11/30/16, so the monthly charts receive a new print. November was a big up month as the white candlestick shows. The red lines show the rising wedge, overbot conditions and negative divergence that Keystone used to call the May 2015 market top. There was no reason for price to come back above those levels; that was a multi-year top. But alas, the central bankers are extremely powerful and the ECB, Fed, BOJ, BOE, PBOC and other central bankers keep providing easy money joy and here we are over one year later printing record all-time highs on all four major indexes (SPX, INDU or DJI, COMPQ and RUT).

The maroon lines show the SPX printing a new all-time high in November at 2214.10 on 11/30/16 above the high in July that was above the high in May 2015. This month, December, is only 2 trading days old, currently displaying matching highs compared to November's candlestick. Thus, price is moving steadily higher since the summer time. How do the indicators look?

The RSI is unenthusiastic meandering sideways, which would be negative divergence, and over the two-year period is in clear neggie d.  The MACD line is neggie d over the last two years but has a sliver of upside it is trying to create over the last couple months. The MACD cross is positive so watch to see if that black line dips below the purple line at 71.33 since that is a tell for trouble ahead for stocks. Stochastics are overbot. The price action displays a rising wedge pattern. All these items are bearish.

The pink box shows the glorious uptrend in stocks through 2013, through 2014 and into the May 2015 top. That uptrend was the real deal. The ADX is now down at 13.75 laying on its back which indicates the recent multi-month upside move in the stock market is not a strong trend. If the stock market expects joyous higher highs ahead, that ADX should be above 20 and heading to 25 and higher. Instead it keeps sinking lower. The up move in stocks since the February bottom early this year is not a strong uptrend.

The chart favors lower prices ahead in the monthly time frame. Stocks would be expected to print a multi-year top now, say anytime from now to January, and the top may already be in, and stocks should trend lower for many months perhaps a year or two. Watch that MACD cross. 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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