SPX 30-Minute Chart Negative Divergence

The red lines show a bull flag with first leg from 1160 to 1265, a 105 point move, the second leg starts from 1205, thus, 1205+105 = 1310 target, now achieved. The neon teal and neon green lines show negative divergence across the board. The higher highs in price are met with negative chart indications and a pull back in price would be expected now. The overbot conditions (stochastics have no more space to move up) and rising neon green wedge reinforce the need for a spank down. The last couple days, however, shows markets floating upwards on the absence of sellers, the majority of traders are bullish and long currently.

From a contrarian perspective, this bullish sentiment, as evidenced by indicators such as the CPC put/call printing 0.7 and 0.8 numbers the last three days, also reinforce the idea that the markets need a rest now, or very soon. The volume is higher than the holiday volume but still below the Fall volume so this bull move is not convincing from a volume standpoint.

When price receives the spank down, watch for the 8 MA and 34 MA cross to gauge the seriousness of the selling, as well as the RSI and stochastic 50% levels. Also worth watching is the 100 EMA support line which price respected as shown by the pink circles. The brown arrows show the negative divergence spank down in early December and positive divergence launch in December.  The neon blue arrow shows the negative divergence top now in place. Projection is for a spank down to occur and for sideways to sideways lower prices moving forward.

Note that Keystone's algorithm, Keybot the Quant, shown in the left margin on tis site, went long 12/20/11 and remains bullish, so when the algo turns negative that would confirm a market trend change from bull to bear. 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.