MUB Municipal Bond Fund Daily Chart Rising Wedge Overbot Negative Divergence

Municipal bond fund topping and about to take a large fall from grace. A spank down occurred a month ago (purple lines) due to the negative divergence. Price then recovered as traders ran to treasuries and bonds, any type of bonds, to seek perceived safety, thus price jumped up again and now has created an island (red circle). Watch for an island reversal where price gaps down to 106.50. Regardless how she comes off the top now, the blue lines seal the fate of MUB. Note the rising wedge, overbot stochastics and negative divergence across all indicators and also across the multi-month time frame. Down she will go.

A talking head appeared on Bloomberg this morning saying to not worry about muni's, Meredith Whitney was wrong. This chart says he should rethink his words and Meredith will be proven correct as the weeks move along into 2012. Initial projection is the gap fill at 106.50-107.00, then lower to 105.50, then 105.00, then much lower. Pay attention to the 20 MA at 106.36 since once that is lost increased negativity will accelerate. Also note that money flow has now lost the 50% level, bearish. Watch the RSI and stochastics lose their 50% levels to indicate continued bearishness. This information is for educational and entertainment purposes only. Do not trade based on this information. Consult your financial advisor before making any investment decision.

Note Added 10/3/11 at 11:53 AM EST:  Note how price dropped to fill the gap under the island top. Currently there is a fight at the 20 day MA. Price is now printing 106.51 and the 20 day MA is 106.47. Failure here will flush price lower.  If you have any hope for muni's at all, you need to hold the 20 MA. The projection is that it will fail.