The thin red lines show what to watch for next. The indicators are all below their levels from two weeks ago (at the market top) but are not negatively diverged since a divergence cannot exist until price places another high. So watch for price to print 1531+, that provides the higher price print, when that occurs, watch the four thin lines for the indicators. As long as the indicators stay below the thin red lines the bears will create the next smack down. If any of the indicator break up through the thin red lines then the bulls will have a few extra days of upside steam. The next resistance above is a touch of the upper BB at 1534. Above that is 1540 and above there is very strong resistance at 1548 and 1553. The SPX is only five or six points away from 1531 and it is easy to see that the indicators do not have much oomph for this ride higher hinting that negative divergence will form again. Either that or price simply rolls over from here again.
The red squares show distribution. As Joe Bagholder shows up because the guys on television told him to invest his life savings into stocks, the funds and hedgies are distributing stock to these Johnny-come-lately sucka's. Following an up day, while Joe is all excited about the prior day's up move, the smart money is distributing their shares to this bagholder. That is shown by the larger sell volume candles after the up day. Tomorrow would be another good candidate for a distribution day. Projection is a move to 1531, perhaps 1534, then negative divergence should spank her down again. Alternate move is simply down from these current levels. 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.
http://charts.stocktwits.net/production/original_12385139.jpg?1362439590
ReplyDeleteit's so close to being over it's sad..
Excellent chart. It's a head-scratcher. But, when you think about it the answer is obvious, the SPX is moving up purely on the Fed's crack and nothing else. That is a scary proposition. The divergence should correct and the lower copper should pull the SPX down rather than the other way around. These are special and interesting markets.
ReplyDeleteIn some ways the action is reminiscent of 9-11. The underlying economy was weakening and the dotcom bubble had popped but there was plenty of bullishness in the markets. Then when 9-11 hit the markets tanked but the economy was the major factor for the big market drop into the October 2002 low, and all-clear signal March 2003 when the Iraq War Rally began. For years afterward, many analysts and traders would comment on how the markets and economy were recovering but 9-11 ruined everything and that is simply not true, the 9-11 event actually served to mask the underlying sick economy.
One outcome forward is the event out of left field that can occur, such as a terrorism event or new large war beginning. Then, as the years play out folks will say how the economy and markets were in such great shape in early 2013, but _______ occurred, whatever it may be, if a major world event does occur. At the same time, the ongoing characters in Europe and China, as well as a potential Japan event, are all in the mix as well. These are epic times for markets right now, you can feel it.