SPX Daily Chart Positive Divergence Bounce 6-17-11

SPX daily chart now showing the positive divergence bounce occurring from the RSI, histogram and stochastics (purple lines). Note, however, the red lines for the MACD line and the money flow which remain weak and bleak and want to see lower prices. Looking back at March, the indicators were weak and bleak with price, no postitive divergence, but price recovered anyway in March. That March profile, however, told you that price will come back down again to finish business and price did come back down. Note the slight weakness in the indicators from the March low to the current price low, telling you that in the future some lower prices would be prudent again.

Price bounced off the 200 MA so watch that closely, 1258 is the starting year number for the SPX as well and also sturdy support as the pink line shows. Also, the SPX 10-month MA is a key number, and that is 1268 now, exactly last nights close. There are gaps below that require filling. Looking above the SPX has not left behind any gaps except that one up at 1360, so you have to keep in mind that the SPX would go up to fill that, just as forecasted that the SPX would come back up after the gap left behind at 1340 in February. Perhaps the QE3 announcement, or QE Light, or whatever they want to label it, will provide the impetus to fill that 1360 gap in the future.

But, sticking to the here and now, the chart is very weak. A bounce is occurring as the positive divergence is forecasting. Price may recover to 1289 and 1307. 20 MA is under the 50 MA which is bearish. Note the black downward channel, the lower rail failed ealry June, then note the back kiss two days ago at 1289, then failure again, setting up the positive divergence and pop off the 200 MA. If price continues to bounce the next couple days, an attempt to move back up into the downward channel would be in order and that would target the top rail at 1307 resistance.

With volatility coming up, the broad indexes are going to make larger point moves each day. This information is for educational and entertainmen tpurposes only. Do not invest basedon anything you read or view here.  Consult your financial advisor before making any investment decision.