SPX S&P 500 2-Hour Chart; Oversold; Falling Wedge; Positive Divergence; Lower Band Violation

And the band plays on. What happened!!? The bears slap the bulls in the face again. It is very surprising that price would come down for lower lows with the set up on the 2-hour but charts can only price in everything known up to the minute. Typically, the news event that either torpedo's markets, like today, or launches stocks, is easily identifiable.

Not so much today, however, although the exact top intraday did occur when bond king Jeff Gundlach basically said the SPX is toast going forward. Gundlach said the S&P 500 would take out the lows of the year. Boom. Stocks rolled over and started selling off. Lots of money managers on Wall Street worship at Gundlach's altar. The downtrend is steady lower denoting machine selling during the afternoon. The SPX takes out the low of the year at 2533 printing a new low for 2018 at 2530.54. The S&P 500 closes at levels not seen since October 2017. The tight standard deviation bands push price lower.

Utilities broke down as well as packaging companies. Housing data was lackluster. President Trump tweeted that he does not want a rate hike on Wednesday. The trade and tariff wars continue. Worries increase over a government shutdown on Friday. The vampire squid Goldman Sachs sinks into the corruption quagmire with Malaysia's 1MDB scandal. Of course Europe's problems with Italy, France and the UK Brexit saga continue. Investors are taking their chips off the table and running for the exits.

Well, what does the 2-hour chart show now, after the bloodbath? It is resetting after the downside excitement. We will call it 'Take 2" like in the movies;

The new trading week is off and stumbling. The SPX collapses to 2581-2584, the support level called out in the SPX S/R missive, then to 2578-2579 then bloop, down to the 2560-2569 landing zone. Price then recovers to the flat line but is harpooned by Gundlach. Lower oil prices with WTIC falling under 50 adds to the gloom. Utililties the missing piece for bears collapse which creates despair and hopelessness for bulls. Boom.

The intraday low for this year at 2533 is taken out with a new  LOD for 2018 at 2530. The SPX ends the day at 2546. Interestingly, looking at the SPX S/R missive, 2529-2533 was the solid support and it actually held. This 2529-2530 is big-time important going forward; write it on a sticky note and put it on your forehead. Price ran higher during the last 10 minutes of trading to the 2548 strong resistnace and smack, hit its head on this ceiling, and settles at 2547. The support/resistance levels shown in the SPX S/R missive are dead-on.

The bulls remain happy with the near-term set-up on the 2-hour although it did not work in their favor on Monday. Price prints a lower low and all the indicators are positively diverged. The MACD line, however, is ready to print a lower low which will extend the sick price action for a candlestick or two. So perhaps some choppy sideways is ahead for about 4 hours.

The falling wedge pattern is bullish. The stoch's are oversold and RSI at oversold levels agreeable to a bounce. Price has severely violated the lower band so the middle band at 2629 and dropping is on the table. This expected recovery may start of the end-of-year rally into the Santa Claus rally from 12/26/18 through 1/3/19.

The positive divergence shows that all the indicators no longer have the juice to push price lower, instead, the indicators want price to bounce higher. A short-covering rally can add lots of further upside juice. Stocks are usually bullish into and through the Fed meetings. Stocks are usually bullish from a Tuesday low into a Wednesday high during OpEx. The month has been negative so the expectation would be for up days to finish the month. It will be interesting to see if the CPC and CPCE put call ratios show fear and panic.

We can see how the 2-hour progresses but a guess would be a near-term bottom in stocks late Tuesday afternoon. Simply make sure the MACD line is possie d and the relief rally will begin.

Utilities created the selling today with UTIL dropping below the key 733.60 level called out by the Keybot the Quant algorithm this weekend. UTIL ends the day at....... wait for it........ wait a little bit longer for it........ 732.21 which creates stock market negativity. Very simply, if UTIL rises back above 733.60, stocks will recover. If UTIL continues lower, stocks will maintain a sick negative bias going forward. If UTIL 709 fails, the stock market may potentially crash. If the UTIL 709 failure occurs, it would be advisable to immediately sell any long position you own and then place a helmet on your head. 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.