Monday, January 30, 2017

SPX S&P 500 Weekly Chart; Overbot; Risinig Wedge; Negative Divergence Developing; Upper Band Violation

The red lines show the rising wedge patterns in place; take your pick. Price has  moved into the apex of the rising wedge. The red lines for the indicators are negatively diverged wanting to see a spank down in the weekly time frame, however, the MACD  line remains long and strong wanting to see another higher high in price after any pull back. The MACD line hints that a jog move is likely needed, down, then back up to a matching or higher high, then roll over to the downside, on a weekly basis, as long as the MACD negatively diverges when price comes back up 2 or 3 weeks out.

The other thing to watch is the RSI that is dead flat. This can be called negative divergence but if that RSI sneaks a smidgeon above the prior high from a month ago, the bulls will  have more upside juice for a few more weeks and the RSI may want to explore the overbot territory. This does not have to happen. If the RSI remains flat as the MACD line rolls over with negative divergence then the SPX will be cooked.

The ADX had called the market sell from mid-2015 into early 2016 a strong trend lower for price (pink box). Interestingly, this entire one-year upside rally, of course induced by the central bankers which has been the case for the last eight years, is NOT a strong trend. This is surprising considering the long time for the rally and drastic move higher from the 1800's to 2300. The central bankers are pumping stocks higher not the market fundamentals. The central bankers are the market.

Market bulls need the ADX to move above 20-25 to prove that multi weeks and months of upside rally joy is ahead. Otherwise, price will roll over to the downside as the impact of a weak trend takes hold.

The pink arrows show the tight band squeeze that popped price skyward. Tight bands do not predict direction they only tell you that a big move will occur, and the bulls won again. The SPX has violated the upper band (pink) so a move back to the middle band, which is also the 20-week MA, at 2200, and rising, is in play.

The expectation is for a jog move ahead; down for a week or two, then back up for a week or two for another higher high in price to satisfy the long and strong MACD line, then roll over to the downside on this weekly basis. The caveat is the RSI so watch it closely over the next couple weeks. Bears need the RSI to start heading south.

Marrying the above with the SPX support/resistance information in a prior post, and considering the weekly basis and intermediate term, price will seek the middle band at 2200 and rising which matches up with the strong 2205 support level. If the bulls can keep stringing the game out further, the strong support at 2213 would be another downside target. There is a big-time air-pocket at 2214-2234 so if 2234 fails, look out below.

A logical expectation is for price to sell off for a week or two. There may be faux worry exhibited by traders but many will probably buy the dip sending price back up to satisfy the MACD. At that point is where the roll over likely occurs so perhaps an intermediate top coming in February. Once the downside begins, the expectation would be for price to target the 2205-2234 landing zone perhaps around Valentine's Day. At that point, if you remain stubbornly-long, you may need your honey to ease your pain. 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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