SPX Weekly Chart Overbot Rising Wedge Negative Divergence

The SPX prints two down weeks in a row after printing the closing and intraweek high for the year when Chairman Bernanke announced QE3.  The upside spike violated the upper Bolinger Band (BB). The neon green dots show how price always migrates back to the center BB, at a minimum, once an outer BB is violated.  The center BB now, which is also the 20-week MA, is 1378, which must remain in play as a near-term downside target.  Als oof interest is the 10 EMA, a very useful indicator for the weekly chart. Check all your current holdings against the 10-week EMA, if price is above you are happy if long, if price is below you are happy if short. Price respected the 10 EMA four weeks ago so this support at 1423 is very important and likely needs tested. Note that strong support exists at 1424 as highlighted on the previous post listing the S/R levels.

The black rising wedge is bearish.  The red lines show negative divergence in place, bearish. The hype this summer with Draghi's tall talk and bond-buying plan, as well as Bernanke's QE3, prints the neon green lines for the indicators indicating some long and strong action. Therefore, price will likely want to come back up to print matching or higher highs as compared to the 1366 closing high and/or the intraday high at 1375 but this should result in universal negative divergence, both shorter term and longer term. Watch for a potential support test at the 10 EMA at 1423 and possibly the middle BB at 1377, then a move back up again, then roll over.  The alternate is price bounces early this week and tests those high levels right away, then roll over. In any scenario, the chart says the upside is very limited from here and far lower prices should be expected for the weeks, and months, moving 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.