SPX S&P 500 2-Hour Chart; Positive Divergence

The SPX hourly, daily and weekly charts topped-out with negative divergence over the last few days. The charts will need checked tomorrow once the new candlesticks begin printing to make sure the negativity remains in place especially on the weekly chart.

Obviously, the hourly time frame is the fastest moving time frame so it will flip bullish to bearish and back again once or a few times in relation to the daily time frame and many times back and forth when compared to the weekly time frame. Thus, the 2-hour chart is setting up for a rally in stocks, and S&P futures are higher on Sunday evening on the East Coast, but the daily and weekly time frames remain in neggie d wanting lower prices in stocks going forward.

Trading is playing multi-dimensional chess where the time frames are the dimensions. I see some of your eyes are glazing over so simply nod your head yes and say Uh-Huh.

The S&P 500 (US stock market) topped out with neggie d (red lines) in the 2-hour time frame and the spankdown occurs. Price trends lower off the top favoring the lower standard deviation band on the way down. The SPX makes a lower low in price and all the indicators are positively diverged (green lines). A relief bounce is on tap in the 2-hour time frame.

Watch the RSI and MACD. See how their possie d is tentative? After stocks begin trading on Monday morning, check the chart because if either indicator slips for a lower low, that means price will want to jog once more before bottoming (down-up before marking the bottom with possie d across ALL the indicators).

A candlestick will print at 9:30 AM EST, then 10 AM, then 12 PM noon munchtime then 2 PM. Thus, the bottom may be in now on the 2-hour, if not it likely will be on Monday morning. By noon you will know the story. Simply check to make sure that the chart bottomed properly with possie d.

Marrying the 2-hour time frame with the daily and weekly charts, the path ahead is up for stocks probably on Monday and Tuesday, perhaps into mid-week, then the 2-hour chart will again set up with neggie d and top-out again, then the sogginess on the daily and weekly charts will re-exert their negativity as the 2-hour begins dropping again and drag stocks down for the next leg lower going forward.

The 2-hour will begin rallying tomorrow morning and then simply watch it this week to see when the neggie d forms (like the red lines again), and that should be a great top to short. At that time, the 2-hour will roll over again and kick-in the next leg of down for the daily and weekly time frames. Of course, if you do not day or scalp trade, and you instead like to hold positions for many days and/or weeks, you could short the market going forward and not worry so much about catching the exact top on the 2-hour chart.

Check the SPX weekly chart after the new candlestick starts for the week to make sure that time frame is in neggie d confirming the top. A multi-week down move in stocks is going to get everyone's attention. Especially when the bull party is in full swing with rainbows and blue skies ahead and a recession is taken completely off the table by most of the Wall Street analysts. The future's so bright, you gotta wear shades. 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.