SPX S&P 500 Daily Chart; Expansion (Megaphone) Pattern; Negative Divergence Developing

The megaphone, or expansion, pattern remains in play on the SPX daily chart .

Note the volume candlesticks that fade lower each day and none of the up days were able to exceed that big 1/3/19 sell day. If this was a strong stock market rally with legs, the volume should be higher especially at the beginning of the year. Price will likely want to come back down to take a look at that 2450-2500 area again to test that volume candlestick. If the SPX comes down and then bounces on stronger volume, the upside rally will have strong legs. If not, price may want to relax and slump over and drop to take another look at the December lows at 2350-2400 and deciding to bounce or die from there.

The SPX continues enjoying the sound bite rally making higher highs. The RSI had leveled off, which is neggie d, but the happy trade talk goosed the RSI higher again. The stochastics are overbot wanting price to take a rest. The money flow has now negatively diverged and is out of gas. The MACD line and RSI, however, are long and strong wanting another higher high in the daily time frame after any day or so pullback. So price may want to jog up and down for a couple more days for the MACD and RSI to negatively diverge and identify the near-term top.

The expectation would be for stocks to begin pulling back any day forward but the positive news hype from President trump and the global central bankers maintains the upward move in stocks. The uber high record-breaking NYMO needs resolved which points to downside ahead in the short daily time frame.

The SPX is above the 50-day MA at 2627 a big win for bulls. The upper band is at 2672 and is in play. The 50% Fibonacci retracement of the crash from 2941 to 2350 is 2644 where price is at now. The 100-week MA is at 2618. The 20-month MA is 2663. The 200 EMA on the 60-minute chart is 2584. Price will need to battle up through the 2644-2663 resistance to chart a path higher.

The chart clearly depicts an expansion pattern (blue lines) also called a megaphone pattern due to its shape. Keystone added the mouth hole and handle to the megaphone so you could feel the vibe. That upper blue trend line is in the 2640-2700 area for the next week or so which jives with that 2644-2663 resistance zone.

The SPX rallies above the gap level at 2600, also a psychological level. There is another gap above, big enough to drive a car through at 2635-2650 so price may want to top out in this near-term at this gap-fill level which jives with all of the above discussion and price now sits at 2636.

Any move higher depends a lot on the US-China trade negotiations and further dovish comments from the Fed and other central bankers. The death cross occurs in early December (black circle) so the stock market will remain sick in a cyclical bear pattern until a golden cross develops.

Back to the megaphone. After price tops in the days ahead due to neggie d, or perhaps due to negative news, look at the drop the expansion pattern predicts down to SPX 2100-ish in late February early March. Do you think the megaphone pattern will play out? It would be comical since the Wall Street Einstein's call for SPX 3000, 3100, 3200 and higher for this year. 

The bulls receive upside juice from lower vbolatility and a big bank rally. Keystone has been bringing on index shorts the last couple days, for VST trading, but the positive news bites are punching him in the face. Stocks should receive a pullback in the days ahead from that elevated NYMO and the developing neggie d on the hourly and daily charts. 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.