SPX Monthly Chart Rising Wedge Negative Divergence QE Time Durations Follow Fibonacci Sequence

Days ago this chart was set up to log a negative month for December, instead, the 12/31/12 late day orgy bounce, due to positive rumors on the fiscal cliff drama, occurs sending the SPX to a monthly higher high as compared to November. The market bears cannot catch a break. The bulls are running strong.  The thin resistance line at 1468-1472 highlights that price has not yet overtaken the two intraday highs from September and October to create new five-year price levels.  The strong resistance at 1485 is key since that would lead to the 1500's.  On the underside, the 1340-1350 area is strong support.  Price has started the year with its heaed already jammed up into the top of the rising wedge, thus, a major market decision has to be made as this new year begins. As springtime brings the blooms, one side will be a big winner, the other a big loser.

The chart favors the bears.  The red lines show the negative divergence in place. The stochastics are overbot and have been for three years. Along with the rising wedge, these tools say down. Note how the volume pariticpation continues to disappear as the months tick by. The high volume days are highlighted and these price levels in the rectangle boxes will likely need reexplored as time marches on. The March 2009 bottom was artificially created by the Fed's QE1 and the MACD line and stochastics clearly show that they were not happy with the recovery move since there was unfinished business at the lower levels and price was nevery allowed to base and wash out all the garbage. Instead, markets have been pumped higher on stimulus, a floating garbage pile if you will.

As Keystone has higlighted in previous charts, the quantitative easing measures have followed the Fibonacci Sequence. The sequence runs 0, 1, 1, 2, 3, 5, 8, 13, 21, etc....  See how you take the last two numbers added together to create the next number? This pattern repeats in science and nature, all around you. Interestingly, starting with QE1, that lasted 13 months.  QE2 lasted 8 months. Operation Twist and the ECB's LTRO 1 and 2 (the third quantitative easing measure) lasted 5 months. The fourth QE measure, QE3 Infinity and the ECB's OMT, created the 3 month rally July-August-September. The fifth QE measure, QE 4 Infinity and Beyond, creates the two-month pop, mid-November to now.  As seen by the sequence, we are at the end of the line. Two more one-month pops may occur to fulfill the Fibonacci Sequence fully but clearly the QE is having less and less of an affect over time.  Also consider that all the recent money bazooka fire power, from the summer to now, the last six months, has only served to keep the SPX buoyant moving thru 1400-1470, like a drowning victim keeping his head above water.

The 10-month and 12-month MA's are key, and have now converged to 1400-ish so that is clearly a major line in the sand.  Keystone's SPX 12-Month MA Indicator is a key cyclical market signal. If 1400 fails, the markets are in serious trouble, the 1340-1350 would offer resistance but after all the water under the bridge in recent years, if price loses 1400 you can likely kiss it goodbye for the markets. The 1200's would be likely.  The bulls are happy, however, sipping champagne while using the bears as foot stools, sitting at multi-year highs, before the 2008 crash.  The RSI has not ran into the overbot territory so that is what the bulls would want to see to show continued up. The green lines show hte long and strong profiles for indicators forecasting higher highs for price, which occurred. 2011 was key since the long and strong profiles disappeared then. In 2011, the top was 1380-ish and note that we are only about 60 handles above that level from almost two years ago.

Projection is for the SPX to begin dropping moving forward thru 2013, receiving a spank down from the negative divergence, rising wedge and overbot conditions. 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.