SPX S&P 500 Daily Chart; Overbot; Rising Wedge; Negative Divergence

The SPX 2-hour chart peaked out with neggie d and dropped on that hourly basis days ago but as was previously explained with charts, the daily chart still had indicators that were long and strong. Therefore, despite the weakness in the VST, you knew price would want to come back up for another high on the daily basis and it does. In fact there are three new highs over the last few days. Each time stocks drop, President Trump is quick to say the US-China trade talks are going well or one of the central bankers coo dovish tones. The central bankers are the market.

Stocks are typically bullish moving into and through the Fed meetings (over 80% of the time) so the buoyancy in stocks is not surprising yesterday afternoon.

The idea for this daily chart was to wait for the long and strong MACD line to flatten into negative divergence and roll over which signals the near-term top. Remember, the low CPC and CPCE put/call ratios continue to not be rectified as well as the elevated NYMO. These charts scream continued complacency and lack of fear so traders likely need to be slapped in the face again. The daily chart is finally setting up for the neggie d smackdown--as long as the MACD line rolls over now.

The price move forward depends on that MACD line. If you squint, it looks flat but then it may have a hair of upside momo. That would give price the last bit of fumes to make another high say, tomorrow but that should be all she wrote. Perhaps the bears can finally gather some downside momo with the daily chart moving into negative divergence. The put/call and NYMO mojo should kick in slapping the SPX lower.

For the bulls that are long that chased the upside yesterday, you want to see that MACD line to keep sloping higher. Also, the RSI never reached overbot territory so the bulls can hope for some type of good news that will pop it slightly and that will extend the market top another 2 or 3 days. The RSI may decide to seek that +70% overbot territory. The SPX also did not quite touch that upper standard deviation line so that must be left on the table for the bulls.

For the bears, the negative divergence with the indicators says price is running out of gas and will fall on this daily basis. The 20 and 50-day MA's at 2609-2611 are in play as support. The 100-day MA is at 2712. The 20-week MA is at 2692 and 50-week MA is 2730. The 6-month MA is 2747, the 10-mth MA is 2737, the critical 12-mth MA at 2727 (that dictates whether the stock market is in a cyclical bull or cyclical bear market) and the 20-mth MA at 2666.

Thus, with price at 2680-ish, if the upside resistance at 2692 gives way, the SPX will seek 2712. If that is achieved, the important 2727-2747 range is next; here the S&P 500 decides if the stock market remains in a cyclical bear, or not. Strong support is at 2666 then 2609-2611. In this near-term, bulls win above 2692 while bears win below 2666.

The rising wedge is ominous since these patterns usually result in a bloody mess and carnage. The new moon peaks for the month on Monday at 4 PM EST so the expectation would be for a soft stock market from Friday through Monday. The SPX is peaking out on the daily basis and ready to roll over barring any positive news event.

The weekly chart, however, remains long and strong. Thus, expect a sharp flush lower, perhaps to finally resolve the low put/calls and elevated NYMO, and then another V bottom with stocks shooting higher again for more new highs and for a test up into that SPX 2720-2750 area for a major decision say, in mid to late February or early March. 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.

Note Added 10:22 AM EST: The stock market joy continues. President Trump is bragging that a trade deal will be reached and he plans to meet with President Xi in the near future. The MACD line on the daily chart squeezes higher on the news; ditto the RSI. This opens the door to the additional jog move described above. The daily chart may need two more days (down-up) to top out when the MACD line goes neggie d. The sneaky RSI may want to seek overbot territory which would also boost price. This is why you have to wait for things to set up completely. The near-term top remains in play, in this daily time frame, and the stock market should top out any day any time forward, today, Friday or Monday.

Note Added 10:30 AM EST: Look at price go. Stocks are rocketing higher on happy trade talk. The SPX is testing the 20-week MA at 2692. The S&P 500 moves up through 2692 like it is not even there. The S&P 500 will next seek the 100-day at 2712 and may want to test that key 2720-2750 area sooner rather than later.

Note Added 10:35 AM EST: Traders are singing, "Happy Days Are Here Again," buying stocks with both hands. The SPX is up 16 points, +0.6% to 2697. HOD 2698. The RSI and MACD lines are sloping higher so check them after the closing bell to see if they remain that way, or not. If not, and the lines are flat, the top is in. If one line is long and strong and the other flat, stocks will top out in 1 or 2 days. If both are long and strong, stocks will likely top out in 1 to 4 days in this daily basis. When the selling begins, it should not be only a day or two like the last couple weeks; this time the expectation would be for a much stronger multi-day drop in the stock market (followed by more upside on the weekly basis since the SPX weekly chart remains long and strong). For now, however, simply let those RSI and MACD lines tell you what will happen going forward.

Note Added 11:50 AM EST: Stocks rally with the SPX avove 2700 and the Dow turning positive recovering 175 points intraday. Bulls exclaim that the sight "is beautiful."

Note Added 12 Noon EST: Traders are drunk on the dovish Fed wine convinced that easy money will sends stocks higher. The SPX is up 28 big points, +1%, to 2709 the HOD testing the 100-day MA at 2712-2713. The VIX drops to a 16-handle at 16.92 a 2-month low providing bull fuel.