SPX Weekly Chart Three-Year Upward Channel

The three-year upward channel remains in play. The April 2010 top shows the negative divergence red lines creating the spank down, that went from the top rail to the bottom rail, but, the red circle shows that the RSI wanted to see another matching or higher price high in the future, and then this year price came back up to satisfy the RSI. The blue lines show the negative divergence creating the April 2011 spank down and this time no matching or higher high is requested. Thus, price languished and fell rail to rail again as the August waterfall crash occurred.

The green lines show positive divergence that bounced price in early October to begin the big rally back up and inside the channel. The low placed in early October, however, was not very convincing, typically, a weekly closing low at 1100 should have occurred, rather than an intraweek low, for the bounce to be convincing. The argument can be made that price bounced more due to the 200 week MA support holding (note the purple circles) rather than the divergence.

The 20 week MA remains under the 50 MA which is secularly bearish. Over the last couple weeks, price came back up and inside the channel, even closing above the 50 week MA, before falling last week to now print a close exactly on top of the bottom rail at 1250-ish. Note how both the 20 and 50 MA's are lining out sideways which hints that price movement will be sideways moving forward. These MA's create a range of 1228-1270 moving forward. The market bears want to see price fail the bottom rail this week, under 1250, then to fail the 20 MA at 1228, this will usher in multi-week weakness again. The bulls want price to stay inside the channel, at 1250-ish or higher, and to come back up above the 50 MA again. Use these levels, 1270, 1250-ish (bottom rail of channel) and 1228 to gauge price preference moving forward. Also watch the RSI, stochastics and money flow 50% levels to verify direction forward. This information is for educational and entertainment purposes only. Do not invest based on anything you read or view here or on any links attched to this web site. Consult your financial advisor before making any investment decision.