SPX Daily Chart Upper Bollinger Band Violation Fibonacci Retracements Negative Divergence

The melt-up yesterday on the Dow Jones Industrials new all-time high euphoria is reminiscent of the melt-up to start the year with the fiscal cliff resolution. The move yesterday punched up through the upper BB by over two points. Typically, once the upper BB is violated, a move back to the middle BB, and in many cases the lower BB, occurs. The pink boxes show the prior three times that the upper BB was violated. Each resulted in lower prices days later but note the melt-up at the beginning of the year was more of a sideways move. To find consistency in the three data sets, note that on the fourth day after the upper BB violation all three cases show a lower SPX with give-backs of about 25, 15 and 45 points.  This is an average of 28 points lower four days after the upper BB violation. Perhaps these fractals will play out, perhaps not. The middle BB is 1515 and the minute and hourly charts are favorable to a back test at 1525, so the 1515-1525 area is a short term target zone into Monday.

The Fibonacci retracements (if price pulls back today) are shown in blue. Of course if the SPX moves higher, new Fibonacci retracements will be required. The first retracement at the 38% Fib is 1520, the very strong S/R at 1520, so this level carries clout. The lime green squares show the distribution days occurring where the selling volume is the same or greater than the previous days up volume. The funds and hedgies will distribute their stock as Joe Sucka becomes excited about the markets and wants to be involved. Note that none of the last three days volume, for the three big up days (a 40-handle move from intraday bottom to top), is greater than the selling volume four days ago. Watch today to see if a pull back occurs, if so, see if the selling volume is above the last three day's volume, or not.

The red lines show negative divergence and overbot stochastics. Price makes a new high but the indicators are not enthusastic. The RSI, MACD and stochastics do show short term momo over the last couple days due to the thrust higher so a jog move may be required before a more substantive down move occurs. This action would be in line with the projections by the pink boxes. The projection is a couple days of sideways to digest the upside energy but come Monday the SPX may be at the 1515-1525 area, however, these markets can only be studied from hour to hour and forecasts adjusted as the drama unfolds. 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.