SPX Monthly Chart

July ended yesterday so the montly charts printed new numbers.  The SPX monthly chart with 12 MA cross is a one of Keystone's key cyclical signals (reference the Cyclical Signal page on this site).  If the SPX is under the 12-month MA, the equities markets are in a world of trouble. If the SPX is above, it's all blue skies and lemonade.  The Iraq War Rally kicked off in March 2003 as the SPX crossed above the 12 MA and the bombs fell on the desert.  The market top occurred in October 2007.  The Fed saved the day with QE1 in March 2009.  The SPX ran out of gas and started going over the falls in July 2010 when the Fed stepped in with QE2 to save the markets, and the SPX was once again above the 12 MA.

Late last year, the markets were rolling over again, and this time saved by the Fed's Operation Twist in concert with the ECB's LTRO1 and 2 programs.  This stimulus enabled price to stay above the 12 MA up to the present day.  Market bears got nothing on an intermediate and long term basis until the SPX drops under the 12 MA.  Interestingly, all this Fed talk of QE appears overrated since the markets are not in dire shape as was the case for the previous intervention moves.

The move up in 2010 into early 2011 shows a rising wedge, overbot stochastics and negative divergence with the histogram and money flow.  This created the spank down in 2011 but note that the RSI, MACD line and stochastics all wanted to see another higher high in price.  In 2012, this year, we receive that higher price high, and the indicators are now all negatively diverged, which created the spank down off the top a couple months ago. Price may venture upwards to 1400-1430 again, if so, check the indicators to see if negative divergence remains in place for the potential matching or higher price high, which would likely mark the final roll over for the broad indexes. The 10-month MA is also very important, especially to older traders, so provide that adequate attention. Also watch the 10 MA and 12 MA cross for indications on IT and LT market direction. 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.