Thursday, February 16, 2017

SPX S&P 500 2-Hour Chart; Overbot; Negative Divergence Developing

Let's stick with the SPX 2-hour chart as the topping drama continues to play out. Price has gone parabolic and is trading like a commodity. These are epic times.

Stocks cannot roll over until the MACD line rolls over with neggie d. At the thin blue line, as yesterday's trading was underway, price makes a new higher high. When this occurs the RSI, histo, stoch's and money flow are all neggie d (good for bears) but that pesky MACD keeps sloping higher so you knew there would be another higher high on tap for price in this 2-hour time frame. The ascending triangle has hit the 2340 target and plenty more.

The market bears cannot catch a break. President Trump stood on a soapbox waving an American flag promising to slash taxes and implement serious tax reform. The president says the new tax plan is coming very soon. Stocks catapult higher led by the banks. The financials have driven the bulk of the upside gains this week.

Interestingly, traders are buying banks touting inflation and a steeper yield curve but that is not occurring. After a brief pop on Fed Chair Yellen's testimony over the last couple days, Treasury yields remain subdued only increasing about 3 basis points over the last two days and uniformly across all durations which is not resulting in a steeper yield curve. The US dollar index is not moving higher in fact has fallen from 101.80 yesterday to 100.69 now. The chance for a March Fed rate hike is only 42% (typically you want to see about 80% to be sure the hike is on tap). The inflation talk sounds more like bluster and is not reflected in the numbers. Gold was 1230-ish a couple days ago and is now at 1237 so it is not moving higher to any significant extent.

Anyhoo, back to the 2-hour chart, the SPX price moves higher and the RSI kicks on the afterburners and joins the MACD line with more long and strong upside. The histogram, stochastics and money flow indicators are cooked and want price to roll over and die. Sometimes waiting for negative divergence (and positive divergence after a downtrend) is like herding kittens. Once several indicators line up, others go askew. So now, a higher high in price would be expected until both the RSI and MACD roll over with neggie d.

This process can take from 2 to 4 candlesticks (4 to 8 hours) which would be jog moves. Price would move down, then back up, then down, up, then roll over for the near-term top as called out by the low put/call ratios, or anytime sooner. S&P futures are soggy, down -4, as this message is typed about 3 hours before the opening bell. This would provide a down candlestick, then when price likely comes back up for a matching or higher high, check to see if the RSI and/or MACD line slopes negatively to finally call the near-term top. The top is in when the MACD line goes neggie d which should be today or into tomorrow morning, of course barring any other euphoric promises by the new orange-headed leader or the Fed coming out making new easy money promises. A logical target for the market top would be at lunchtime today or in the afternoon; watch the MACD line since it will tell you exactly when.

Charts price in all information up to the minute but cannot price in news events ahead of time like the president's news on tax reform yesterday. The chart above is adjusting after President Trump's proclamations for far lower taxes ahead for individuals and businesses. The expectation would be for the near-term stock market top to occur today. This is historic action in the stock market. If you are a novice trader, realize that an epic story is being written but no one yet knows how the long 8-year Keynesian party ultimately ends. A recession, when it hits, will change everyone's lives. Save your money. 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.

No comments:

Post a Comment

Note: Only a member of this blog may post a comment.