Sunday, June 11, 2017

SPX S&P 500 Monthly Chart; Overbot; Rising Wedge; Negative Divergence; Upper Band Violation; Multi-Year Stock Market Top Developing

Keystone has been posting the SPX monthly chart monitoring the multi-year topping process for the stock market. The S&P 500 prints a new all-time high at 2446.20. Look  at that RSI ramp higher. Interestingly, the RSI is not yet above the prior peaks during the 2015 market top. Watch this closely going forward. The RSI is sloping upwards this year so it has momo in the short term, therefore, the stock market may perform a jog move (down one month, then up one month, then roll over creating a multi-year top perhaps in July-August).

The chart indicators remains negatively diverged (red lines) with the new record high in price. The S&P 500 is floating higher on fumes. The indicators have run out of gas (neggie d). The upper gold band has been violated so the middle band down at 2181 and rising is on the table going forward on this monthly basis. In addition, the lower band at 1888 is on the table should price tap the middle band.

The old-timer's watch the 10-month MA closely. Many algorithms have this level programmed as well as the 12-month MA (Keybot the Quant has the 12-mth MA programmed into its model). The 10-mth MA is at 2297. This level signals serious trouble and destruction ahead for the stock market i fit fails. A drop through the 12-mth MA at 2276 and stocks could easily be in free fall tumbling in earnest without a bottom in sight.

The red rising wedge is very ominous since the collapses from rising wedges can be quite dramatic. The SPX weekly and monthly charts are agreeable to topping out and rolling over. The monthly chart is very significant since this top is likely a major multi-year stock market top and current prices may not be seen again for many years once the market begins moving lower. It may be well into the 2020's before the stock market recovers if the ominous monthly chart plays out for the remainder of this year and over the next couple years. The 18-year secular bear cycle is 2000-2018 so the chart lines up with the expectation that the next couple years will be bad for stocks before the secular bull 18-year cycle begins from 2018-2036.

The expectation is for a multi-year stock market top to occur at anytime now through September. The thought is that is will occur sooner rather than later. The ramping up in the RSI in the very near term hints that stocks may sell off in say, May into June, but then bounce again in June-July to print matching all-time highs, then roll over as the RSI will be firmly negatively diverged at that time both over the last few years and over the near time frame.

Mixing all this windbag talk together and sprinkling on some magic dust, a major multi-year stock market top is likely at hand anytime now through August (this summer into Labor Day). Early August has been a horrible time for markets in the last few years.

As always, if President Trump touts infrastructure spending, tax reform or lower regulations, especially for banks, stocks will rally and delay the top. Ditto if the Federal Reserve or other  global central bankers promise more Keynesian easy money.

Generally speaking, if you are a novice investor stay away from this market. If you enjoyed big profits during the long rally, take the money and run. Leave a lot of your dough sit in cash for the weeks and months ahead. Who cares if you miss a few percent of upside? You must realize that you are picking up nickels in front of a bulldozer. There is a risk of -20% to -30% of downside, or more, versus eking out a few more percent of upside. Do not get caught up in the hype.

The only game-changer to the chart would be if the RSI pokes above the prior highs which would extend the multi-year topping process into late this year and/or early next year.

The reason television commentators and money managers are cheerleading stocks is because the institutions are in a distribution phase. They need to cash in on profits and hand their shares over to a bag-holding sucka and the best way  to accomplish this goal is to get Joe Sixpack all caught up in the excitement and having him buy stocks at the top tick. 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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