SPX 30-Minute Chart 8 and 34 MA Cross Rising Wedge Overbot Negative Divergence

The rising wedge, overbot conditions and negative divergence provided an easy call for the spank down on 1/29/13. Last Thursday, the bears were salivating. The 8 MA stabbed down through the 34 MA so it was smooth sailing for bears ahead, however, on Friday monring, with the wild upside bullish orgy, the bears were crushed as the 8 MA shot back above the 34 MA signaling bullish markets for the hours and days ahead.  We watched the rising wedge and negative divergence, also overbot stochastics, predict the mid-day spank down, which occurred, but moving into the weekend the bulls provided another thrust higher.

The action on Thursday was interesting since the market bounce occurred solely due to the green falling wedge (a bullish pattern). There was no positive divergence in place. Even the price move down late Thursday never provided a lower low to set up positive divergence. Therefore, the bounce is due to external factors, which indeed was the goose on the Jobs Report, and not the current report, traders chose to follow the revisions to 200K for November and December jobs instead. In addition, the tick higher in unemployment rate, now at 7.9%, is going the wrong way for the Fed, compared to their 6.5% goal, thus, traders assume the QE free money orgy will continue indefinitely as well as can-kicking. This type of action creates air underneath the markets. Price has touched the upper BB so a move back to the middle BB at 1507-ish would be expected, at a minimum. Note how the tight BB's, when they squeeze in, create large moves, on 1/29/13 the squeeze was up and on late day 1/30/13 the squeeze was down.

The red lines show all indicators negatively sloped but negative divergence is not in place again until price prints a higher high at 1514-ish, that would trigger the negative divergence and the red arrow shown in the right margin. So price may need to move up a few points this morning. A sideways move is not at all unreasonable after such a big move on Friday. The day after the Superbowl tends to be slow for markets.  Watch the indicators, especially the money flow, since if it sneaks out a higher high, price will want to extend a move across these current levels perhaps into lunch time or the afternoon. The buying volume remains unimpressive, the moves earlier in January were at lower prices occurred at higher volumes. Projection is for some sideways and then price should set up for another roll over. Watch the 8 and 34 MA cross. Bears got nothing unless they push the 8 down through the 34. The 8 MA is 1512.87 so if price stays under this level it will drag the 8 MA lower. The bulls will be in clover today if they keep the SPX above 1513. 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.