It's another day so there is more stimulus hype, er, hope. Three gap-up days in a row all based on the rumor that someone's wife's cousin, that works in government, was told by a janitor, that held a glass against the wall, that he may have heard something positive about the fiscal stimulus deal, but it may have been a radio. Crony capitalism is a hoot; look at what it has devolved into. The bulls are on top of the mountain again and can see for miles and miles.
Since the SPX 2-hour chart has been of interest since last week, we may as well keep viewing its progression. Remember, the near-term top is not in until all the chart indicators go neggie d. Right away, you can see the MACD line continuing to point higher. Each day has 4 candlesticks, one at the open, then at 10 AM EST, then 12 noon then 2 PM EST. You can see the gap-up moves. Gaps will need filled at some point forward. Today you see three candlesticks and this chart is provided now since the 12 PM EST noon candlestick just started.
The last two candlesticks are matching highs so the indicators can be assessed. The RSI finally did make its way up into oversold territory (remember that was mentioned last week) so it is agreeable to a pullback and also it is neggie d now. Ditto the set-up on the stochastics. The money flow is also negatively diverged. Ditto the histogram. So it is all systems go for bears except for the MACD that continues to move higher (green circle). You will have to check at 2 PM when that candlestick starts to see if if the MACD goes neggie d to identify the top, or, it it will be a couple more hours into the future.
Price has violated the upper standard deviation band (pink) and price thrusts significantly through; right now the current candlestick is almost above the top band. The middle band at 3417 is in play as well as the lower band at 3353. The red channel is vertical. The last three days of parabolic momentum is due to the stimulus party that is not a deal yet. Thus, if there is bad news, that move should be immediately reversed. Much of the happiness of a stimulus deal is likely already priced-in to stocks.
The blue inverted head and shoulders (H&S) pattern is in play which has bulls salivating and buying stocks at the ask without hesitation. The head is at 3225 and neck line at 3415 so that is a difference of 190 points so the breakout above the neck targets 3605; 3.6K. Timmy Trader runs out the front door of the trading floor yelling that he has to get to the screen printer fast to tell him to start printing the "SPX 3,600" hats.
This move higher is a nice place to short into if a nimble trader. If you want to play it safe, keep waiting for that MACD to go neggie d and then you will know for sure the top is in. Volatility and stocks are both up today so one of them is wrong. Inflation data is on tap this week and a lollapalooza of economic data including sentiment on Friday. The new moon peaks for the month at 3:31 PM EST on Friday which is interesting. Stocks are typically bearish moving through the new moon which would mean into and through the weekend. If price continues higher watch for a matching high comparted to early September since that would bring that prior RSI peak into play likely with negative divergence.
For now simply watch the 2 PM EST candlestick to see if it prints a matching price high, if so, then look at the pesky MACD to see if it has gone neggie d. If the top is not in for this 2-hour time frame, then it likely will top-out tomorrow morning unless Mnuchin, Trump and Pelosi are skipping down Pennsylvania Avenue touting a fiscal stimulus deal. 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 6:54 PM EST: Wheeee! Whooopie! Wheeee! The SPX jumps 57 points, +1.6%, to 3534. HOD 3550 only 30 points from the all-time record. The beat goes on. The MACD continues to slope higher albeit gradually now not steep. You can see with the 2 PM EST candlestick that the RSI is cooked with neggie d as is the other indicators. She may simply drop at the open tomorrow, or, if not, watch for the neggie d on the MACD which will probably print within the first hour of trading for the top on this 2-hour basis. Happy stimulus talk would save the day while negative talk will act as a catalyst to kick in the neggie d. The SPX daily chart still hints that another jog move higher is needed (the top on the daily basis may be a day or three away) but wait for the 2-hour to give up the ghost and see how the daily reacts. The SPX weekly chart is cooked with universal negative divergence across all indicators. The weekly chart wants the SPX to roll over on a weekly basis and drop (begin a multi-week slide lower). Ditto SPX monthly chart although the MACD is poking higher. There are a bunch of days remaining in October, however, and if the stock market falls apart, the MACD will come down and not be a threat for another few weeks of buoyancy. In other words, the long-term stock market top (months and years) is in. This is exciting stuff. Perhaps a little bit of chop for a day or two as SPX price places the top and then, sayonara. The price action is historic and no one realizes it. Remember, the uber low CPC and CPCE put/call ratios signaling complacency (a stock market top) have not yet been rectified and a tradeable bottom has not yet occurred, and, the NYHL is printing uber highs marking a top in stocks. The CPC drops to 0.66 and CPCE to 0.41 both extending their multi-week complacency and fearlessness. If you are a novice trader, new to stock trading, get yourself out before you get hurt. Simply watch for a while and see what happens. XLK, the tech ETF, prints a higher price high on the weekly chart with universal negative divergence occurring. Watch the US dollar index. If that spikes higher, there could be some real fireworks real fast a la March. The steam roller is on standby. Will a fiscal stimulus deal occur?.
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