Tuesday, August 8, 2017

SPX S&P 500 Monthly Chart; Overbot; Rising Wedge; Negative Divergence; Upper Band Violation; Price Extended; Multi-Year Top At Hand

The monthly charts received a new print last Monday on 7/31/17 and a new candlestick is representing August as it develops. The same items are in play as explained in earlier charts. The overbot RSI, stochsatics and money flow are agreeable to a pull back. The rising wedge is an ominous pattern. The red lines show the universal neggie d across all indicators that wants to see lower price sans a tricky RSI. Price prints a record all-time closing high yesterday (8/7/17) at 2480.91 with the all-time high at 2484.04 (from 7/27/17).

Watch the RSI since the bulls are trying to push it above the prior highs in 2014-2015. If stocks sell off this month, the RSI will come down and not be as high as it now appears. If the RSI ends August with a higher high, that will create 2 or 3 more months of juice to keep stocks elevated. Judging by the chart now, the long multi-year stock market rally is ending. It is in the final throes.

The SPX has violated the upper standard deviation band so the middle band at 2222 is in play and even the lower band at 1894 as the months play out. Remember the May 2015 top that Keystone called. The neggie d made it an easy call; it was not rocket science. Stocks dropped and then that Tweezer Bottom (blue circle) and lower band violation created the recovery rally in early 2016 which turned out to be another central banker-fueled orgy of upside joy.

The stock market is up for five consecutive months. It is up 9 out of the last 10 months. The global central bankers continue to collude and orchestrate non-stop liquidity around the world and all that cash floating around inflates all asset prices higher. The central bankers are the market.

The ADX is under 26-ish. The ADX above 26 verified the strong trend higher in price during 2014-2015. Now price moves higher with the ADX languishing lower not impressed with the record highs and indicating that the rally move is not a strong trend higher. 

Price is overextended above the moving averages so a mean reversion will be required some day forward and just think, at some point in the future price will be far below the 20-month MA. The 10-mth MA is at 2361 and serves as an early warning signal that markets are in serious trouble and losing control. Old-timers love this number and it is also programmed into algo's. The 12-mth MA is at 2326 is another key level. Keystone calls this the cliff. The 12-mth MA is programmed into the Keybot the Quant algorithm. If 2326 is lost, all hope is lost for the bulls. Stocks will begin tumbling lower in earnest. The 20-mth MA at 2222, which is also the center standard deviation band is a noteworthy target on the table by the end of this year. If stocks sell off and the 10-mth at 2361 holds that will tell you that the bulls are strong and not ready to give up the market as yet.

The stock market should peak out at anytime and roll over likely placing a multi-year top. You may not see the current prices in stocks for many years forward. This was the thought during the May 2015 top but the central bankers did manage another stick save and here we are at the same place again two years later. Since this is a long-term monthly chart, a target of SPX 2222 by year end is a reasonable conclusion from the chart set-up.

Watch the RSI closely. If it remains elevated through August, this will stretch out the topping process a few more weeks or month or three. Otherwise, say if August begins selling off now and prices shrink, that RSI will drop, and the multi-year stock market will top out quicker in the coming days and weeks. Plan accordingly. 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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