Keystone's SPX 60-Minute Chart with 200 EMA Cross Indicator Megaphone Inverted H&S Negative Divergence

One of Keystone's fave VST (very short term) indicators is the 200 EMA on the 60-minute. Ignore all the spaghetti on the chart and simply look at the thin blue wavy line, the 200 EMA, now at 1402.32. Look at how price respects this important moving average for the last three months.  Price broke down thru in early October (red circle) signaling bearish markets ahead but the bulls recovered (green circle) quickly a few days later. The failure in late October, however, sealed the bulls fate, verifying the move off the top at 1465 and sending the SPX to the 1343 intraday low a week ago, 122 handles.  The positive divergence in November launched price off the bottom and the universal agreement of the indicators shows the move off the bottom would have some life.

The inverted head and shoulders pattern is in play, head at 1349, neck line at 1391, so a target of 1433 is in play to make bulls happy. On Friday, price moved up thru the 200 EMA signaling bulilsh markets for the hours, days, perhaps a week or three ahead.  Early this week, however, will provide ample drama. The bears must come to play if they plan on reversing the market happiness. Note the jog that occurred in mid-October where the 200 EMA was violated to the upside but quickly reversed providing lower prices for a couple days before another bounce occurred.  The fractal shown by the green box may repeat with a pull back in price but then a move higher in the days ahead may tag the 1433 H&S target.

Charts these days in multiple time frames are showing megaphone patterns (thin black lines) with expanding price movement as time moves along. Keep the megaphones in mind while viewing any chart.  The strong 1413 resistance is at the top rail of the megaphone so this would serve as a critical resistance ceiling.  The red lines for the indicators show negative divergence wanting to force price south immediately since it got too big for its britches during the seasonally-positive and light volume holiday week.  The RSI, which carries more clout than any of the other indicators, as well as the MACD line, remain long and strong.  However, the indicators are in overbot levels. This set-up typically results in a spankdown, but then price needs to come back up to satisfy the RSI and MACD line, which should then set up with negative divergence, so roll over for price occurs. This would manifest itself with a move down to 1402-1404, then back up to 1413, then roll over with downward action for a few hours or days.  Each candle is six hours so it may take Monday and Tuesday for the jog down and back up to occur before a stronger move down occurs, perhaps to retest the 1391.  The 1391 back test is also a test of the neck line for the H&S so if successful, would then open the door to head upwards to 1433. The bears will obviously want to see price collapse from 1391 to start the strong downward action again.

Keeping things basic, simply watch the 200 EMA cross.  If price stays above the 200 EMA, there is lots of bear pain ahead. If price falls under the 200 EMA the bears can retake control. In addition, watch to see if the down-up-down move occurs on Monday into Tuesday. 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.