Keystone's SPX Monthly Chart 12 MA Cross Indicator

Today is EOM so the monthly charts receive a new data point. One of Keystone's cyclical signals from the Cyclical Signal page on this site is the SPX monthly chart with 12-month MA cross which tells you if the markets are in a cyclical bull or cyclical bear market. The chart is also called the 'Decider'. Currently, the Decider says continued cyclical bull market. Back in March 2003, the bombs started dropping to begin the Iraq War. Back then Keystone jumped in with both hands, when you see the bombs dropping and everyone is worried sick, buy.  Price crossed down thru the 12 MA in November-December 2007 signaling major trouble ahead. The markets never bottomed until over one-year later when Chairman Bernanke had to step in to save the markets with QE1, the beginning of the money pumping that artificially props up markets and prevents price discovery.

So the cyclical bulls were running into 2010 when another roll over occurs, the Fed saves it with QE2.  In 2011, that roll over was stopped with Operation Twist and the ECB's LTRO 1 and 2 that kicked off coordinated global intervention. Then last May 2012, the SPX dropped under the 12 again to signal a cyclical bear but the bulls reversed that immediately when Draghi pledged support for the euro providing the OMT program, and Bernanke chiming in with QE3 Infinity.  Then the last foray to the wild side, when price fell thru the 12 MA only for Bernanke to pump some more as traders sniffed out QE4 Infinity and Beyond which was announced in early December 2012. What a sordid tale it is.

The red rising wedge is a wicked pattern, the corrections out of a rising wedge can be dramatic. Rising wedges are bearish patterns that resolve to the downside. January is a big up month with price tagging the upper rail of the wedge. The red lines show firm negative divergence in place wanting to see a spankdown perhaps forcing the failure out of the rising wedge.   The RSI, MACD line and money flow are sneaking out a hair of momo (short green lines) so the bulls may try to bring the SPX back up into the apex of the wedge after a selloff. The RSI has not moved into overbot territory so that would be one thing for the bulls to try and push for to extend the upside.  From peak to peak, 2007 to now, note that the RSI is far below those levels. Negative divergence cannot exist until price makes a higher high but price is almost at the same levels as 2007 and the RSI show how there is far less strength in the move higher this time as compared to 2006-2007.

Projection is for price to move lower and fall out of the rising wedge in Q1 and drop significantly lower. If the money pumping can extend the party a bit longer, a move to the 2007 highs may be attempted but the overall move is already very long in the tooth. Price is now at the point where a failure out of the rising wedge would be expected. 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.