SPX S&P 500 Monthly Chart; Overbot; Rising Wedge; Negative Divergence Under Development; Price Extended; Upper Band Violation

The monthly charts receive new data points last Friday and will begin a new January candlestick tomorrow morning. Keystone has been posting the SPX monthly all year long waiting for the proper alignment to call the top in the stock market but sometimes it is like herding kittens. If you recall, the chart was set up for a pull back and potential major top but the MACD line continued higher. That needed to negatively diverge before the top could be called.

At the same time, the ECB and BOJ flap their dovish wings sending stocks higher and the tax bill in the US added rocket fuel to the stock market. The RSI leaps higher into the stratosphere, the MACD  line breaks out higher and the money flow is also now long and strong. The bulls are unstoppable.

The stochastics remain cooked, negatively diverged and overbot (bearish). The RSI is overbot (bearish) but the indicator is long and strong (bullish). Price is extended above the moving averages needing a mean reversion lower (bearish). Price has violated the upper standard deviation band (pink) so a move back to the middle band at 2343 is on the table going forward (bearish).

That red rising wedge was wicked bearish in 2009-2015 and the SPX collapsed from May 2015. Stocks were trending lower and cooked headed for sustainable downside but that is when the Federal Reserve stepped in February 2016 to save the day. The central bankers are the market. The red circle shows the Tweezer Bottom that formed at the time. The central banker juice sent stocks higher and signaled the all-clear for equities again. Price, however, is now in another rising wedge pattern (bearish).

The RSI, MACD line and money flow must turn over with neggie d before the top can be in. Therefore, perhaps down January and back up to the record highs in February, at that time the RSI and money flow will likely be neggie d but the MACD line is questionable. If it is negatively diverged, that is multi-month and likely multi-year top for stocks. If not, the MACD line should go neggie d with another down up move which places the time frame into April.

Thus, wetting the index finger and holding it in the air pointed skyward, says the major market top is likely to print between February-May unless a drastic event occurs where the mrket would roll over sooner rather than later. The 2340-2400 landing zone is a reasonable expectation this year.
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