SPX Monthly Chart Overbot Rising Wedge Negative Divergence

Friday provided the monthly print for August, the SPX now up for the last three months in a row forming the third rising wedge over the last couple years.  The red lines show the negative divergence that created the April 2012 spank down. Price has now returned to the same levels and note that the indicators are all flat or negatively diverged once again favoring a spank down. The SPX cross with the 12-month MA is one of Keystone's cyclical indicators. If price is above the 12 MA, the market bulls are riding high with no worries and the markets are in a Cyclical Bull pattern.

Note the 2008 Fall crash, then the bottom in spring 2009 when Chairman Bernanke announced QE1 that saved the day, sending price back above the 12 MA.  The next deflationary scare was summer 2010 when price fell thru the 12 MA once again signaling bigtime market turmoil ahead, and, Bernanke stepped in with QE2 to save the day.  Then the August 2011 crash with price failing the 12 MA again, this time saved by the Fed's Operation Twist and the ECB's LTRO 1 and 2; the central banksters now operat in coordinated global collusion. Those measures saved the day last Fall and created the rally in 2012 up into the April top. Note the tiny circle this summer that shows an intramonth failure of the 12 MA but Bernanke and Draghi ran to the rescue to stop any market slide, promising to act with stimulus 'as needed'. Draghi went so far as to say he will do 'whatever it takes', and this Thursday he must prove that his word is good. Interestingly, price is not under the 12 MA which occurred for all previous quantitative easing announcements, so this chart says that Draghi will deliver nothing except more talk.

The chart is weak, volume participation has steadily decreased for three years. Projection is lower prices moving forward on the monthly basis. Overall, anyone long the market can at least take comfort in the fact that the SPX is above the 12 MA, if price falls below the 12 MA, you have a big problem. The 10-month MA is another useful level that should be monitored for price support going forward. 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.