SPX Daily Chart Channels Megaphone Pattern

SPX daily chart shows the rising wedge, overbot conditions and negative divergence that created the market top and early April smackdown.  The falling wedge, oversold conditions and postive divergence created the early June bounce off the bottom. The black upward-sloping channel shows higher highs and higher lows in place reinforcing the bullishness; price needs a higher high above 1375 to keep the party going.

Studying the indicators, note the long and strong profile (thin green lines) during the first half of June. This profile says that price needs to make another higher high above the mid-June top.  And, as expected, price came back up for a higher high a couple weeks ago.  Note how the indicators now show overbot stochastics with the stoch's, MACD histogram and money flow all rolling over and negatively diverged. This created the spankdown from two weeks ago.  The RSI and MACD line, however, are long and strong and want to see a matching or higher high for price once again.  Hence, the markets started upwards again with the huge Friday rally. The profile of the indicators, however, clearly show rollover behavior ongoing so price may run out of gas as it tries to punch higher.  The two red circles show how the MACD line wanted to see a lower low than early June, and still does, and the money flow continues lower during this entire recent up move indicating a preference for the down side moving forward.

The megaphone pattern is ongoing shown by the thick pink lines. Interestingly, the top rail of the megaphone slices down thru 1366, a strong resistance level, that would occur if the 1358-1360 resistance gauntlet gives way. Ominously, the megaphone pattern would target about a 150 handle drop from these levels, thus, 1370-150 = 1220-ish. Call it a landing zone of 1200-1230 in August-October should the megaphone continue playing out.  In the short term, watch the 1358-1360 resistance zone, then 1366 R, then 1372-ish. Projection is that the SPX will likely reverse from one of these three levels and lose the channel, heading lower to fulfill the megaphone pattern as time moves along.  Of course, any Fed QE pumps will alter this outcome. 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.