SPX Weekly Chart Overbot Rising Wedge Negative Divergence M Top

SPX weekly chart continues to exhibit negative divergence.  Three weeks ago we saw the higher high in price print, as compared to March highs, with negative divergence. That created the two-week spank down, but obviously the events from yesterday, with the ECB bond-buying program, reversed the down move and the SPX is now printing new weekly highs once again. In March, as the market topped and rolled over, the MACD line and money flow was not entirely convinced and wanted to see another higher high in price in the future. These higher highs have occurred over the last month.

The upward spike yesterday has improved the mood of the RSI and MACD line over the last month which will want to see another matching or higher high in price after a pull back. Watch the two blue circles to see if the RSI surpasses the March high, or not. If the RSI does not, that will maintain the negative divergence and add oomph to the downside spanking. Considering the overbot nature of the chart for over a month now, and the negative divergence in place or under development, a roll over should occur for the SPX, but first a stutter step may occur due to the recent one-month happiness with the RSI and MACD line. The black line in the right margin is a potential path. The chart is hinting that it is a better time to pare back on long plays and consider the short side rather than buy into the market rally at this late stage.

The Draghi Rally from his 7/26/12 statement accounted for a 7.5% up move and is now closer to the ninth inning rather than the first inning. The M Top pattern remains for 2012. 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.