SPX Weekly Chart Overbot Rising Wedge Negative Divergence Upper Bollinger Band Fibonacci Extensions Gap

The SPX weekly chart has lots going on. The red rising wedge is easy to spot (a bearish pattern).  The red lines show the negative divergence that created the prior spank downs and will create the next one. Price is at a higher high now than September 2012 but all the indicators are negatively diverged over this time frame. Over the last month, however, the SPX is receiving this momo on the fiscal cliff resolution and now the debt ceiling resolution that will be voted on this week. Note the RSI from March 2012 to the September 2012 high. A slightly higher high was made (green line) so the RSI wanted to see a matching or higher high in price again, and that has just occurred. Now the RSI is satisfied and clearly negatively diverged.

The short bars show the Fibonacci 1.24 extensions playing out for all three of the last rallies over the last couple years.  The top in April 2011 led to the drop to October 2011 and then the recovery rally due to Operation Twist and the LTRO1 and 2 money pumps ran to the April 2012 top. The Fib extension targeted 1405-ish which was the area of the top. Then the drop from April 2012 to the bottom in June 2012, which created the need for the OMT and QE3 Infinity money pumps that sent stocks to the September 2012 high. The 1.24 Fib extension targeted 1455, again, where the top occurred.  The September-October 2012 top led to the mid-November bottom, then a 1.24 Fib extension now targets 1502. The 1505 level is a key resistance level that Keystone identifies.

Price is running up to the upper BB at 1492 but not quite there as yet. Once the touch occurs, or sooner, price is expected to come back down to the middle BB at a minimum, 1430, and as happened the prior times, to the lower BB at 1368.  Of course, price may want to make a strong run to firmly stab thru the 1492.  Keystone's key resistance in that neighborhood is the 1496 level. Also of interest on this chart is the fractal in the blue boxes. The action right now is similar to the run up in August to the September top. The neon blue circle shows a little pull back then, about 25 or 30 handles, but price continued higher to place the September top. If this fractal leads to a similar repeat now, a drop from 1486 would tag 1460-ish, then bounce to come back up to the 1500-ish level and roll over. The lower rail of the rising wedge would come in to play on the pull back. The gap down at 1150 is interesting since it sticks out like a sore thumb. In the future, price will revisit that gap.

The SPX resistance levels above are 1485-1486 (now), 1489, 1492.60 (upper BB), 1496 (final gap fill from 2007 and strong resistance), 1499, 1500, 1502 (1.24 Fib extension), 1505, 1511 and 1516. Projection is for the SPX to sell off and move lower going 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.