SPX S&P 500 Daily Chart; Rising Wedges; Negative Divergence; Distribution

There is lots going on in the SPX daily spaghetti chart. The red and orange rising wedges are bearish patterns. Price collapsed out of the orange wedge with a gap-down (blue circle) move. The hammer candlestick marks the bottom three days ago, on Wednesday, when the Whitehouse stepped in to save the day announcing that the US and China would restart trade talks and then stocks were purposely goosed more on word that Presdient Trump and communist dictator President Xi would meet in November at a summit to resolve the ongoing trade wars.

The central bankers have been the market for the last decade constantly manipulating equities higher to reward the wealthy privileged class in America. Now, with folks like Kudlow and Mnuchin in the Whitehouse, that sit and monitor the US stock market daily, the Whitehouse is the market.

The SPX rallies and fills the gap which is something the bears needed to happen anyway. The red lines show the negative divergence in play that spanked price lower out of the orange rising wedge. Price came down to the lower trend line for the multi-month red rising wedge and that is where the Whitehouse stepped in to save the day.

The brown circles show distribution days occurring for the last four months where the smart money is handing off shares to the dumb money. Joe Sixpack is getting all excited about the daily stock market hype on television and rush in to stocks afraid that they will miss the next big rally. Over the last two weeks, the strategists, analysts, traders and pundits are in universal agreement that the SPX will print another all-time record high and there may be a stock market melt-up on tap for the end of the year. Many are proclaiming 3K and 3.1K targets and higher.

All the indicators were in universal agreement with negative divergence that created the drop out of the orange wedge and there was no reason for price to recover so quickly (except for the Whitehouse intervention). Price should have at least touched the lower standard deviation band at 2799 and rising.

As price recovers, watch the horizontal red price line that identifies the high from seven trading days ago. If price matches this high or moves above, check the thin red lines shown for the indicators in the right margin. As long as they remain under the thin red lines, the neggie d would remain in play and price will collapse again. The effects from the prior negative divergence remain in play and price may simply roll over from current levels, especially with the gap-fill accomplished, if the joy from the Whitehouse trade war hype is priced-in.

The purple box for the ADX shows that the drop in the S&P 500 from the 1/26/18 record high was a very strong trend lower. The central bankers always save the day and place their jack boots on the throat of volatility which creates the April low and recovery. Note, however, the ADX remains subdued for four months and is now down to an 11-handle. Despite the rally from April to present, the move up in the stock market is NOT a strong trend higher. Isn't that interesting. For such a robust rally in equities, the ADX should be at least above 20-25 and actually in the 30's. This is likely due to the distribution taking place as the smart money sneaks out the back door.

The RSI and money flow are trying to generate near-term strength which creates a rise in the S&P futures to begin the week up +6 about 2-1/2 hours before Monday's opening bell. The upper standard deviation band is at 2866 so if the Whitehouse keeps up the trade-talk hype, price will likely migrate there. If so, watch the thin red lines for the indicators as explained above. Otherwise, and even if price runs higher, another retreat lower is likely with downside target at the middle band, the 20-day MA, at 2833 and rising, and the lower band at 2799 and rising. Stocks will be in trouble if the lower red trend line of the red rising wedge gives way at 2833-2840. 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.