SPX 2-Hour Chart Inverted H&S Potential Island Reversal Rising Wedge Overbot Negative Divergence

The 2-hour set up today is similar to the 30-minute chart yesterday. The 30-minute and 1-hour charts are rolling over, as described yesterday, and the 2-hour chart was the laggard. The red lines for the indicators show negative divergence that will want to see a spank down, but the stochastics, and perhaps the RSI, likely want to see another price high. The 1691 resistance is key so price should dance around this level today. If 1691 gives way to the upside, the bulls have made the case for 1700+. Considering the rising wedge, overbot conditions and negative divergence setting up, however, the thinking is that 1691, or the low to mid 1690's should hold today, and price would leak lower moving forward.

Note the gap up at 1675 creating an island that SPX now sits on.  So a move lower may result in an island reversal where price collapses back down through the gap from 1675 down to 1672, or, price may simply leak lower and fill the 1672-1675 gap. The blue lines show an inverted head and shoulders (H&S) pattern that makes bulls smile. The breakout up through the neckline at 1669-ish targets 1710-1711, the prior top. If this is the outcome for the days and weeks ahead, a back kiss of the neck line would be prudent first. Thus, the interplay of the support/resistance levels at 1710, 1691, 1685, 1669, 1652, 1649, 1639 and 1627 are very important. Since the Fed is less than 5 days away now, where the answer on QE tapering will be provided, markets may settle in to a sideways range through 1669-1691. Today is key in determining the upper price boundary for the days ahead.

The two neon blue lines are at 1697 and the psychological 1700 serve as resistance, although not as strong as the levels shown in brown. Projection is for the SPX to top out today and leak lower, perhaps to create an island reversal at 1672-1675, and test the strong 1669 support and neck line for the inverted H&S. The 1691 is a very important number today that carries serious clout. A close above 1691 says 1700+ is coming. Bears are in business as long as they prevent 1691. The daily chart shows some upside juice available, for the days ahead, after a pull back occurs, which should create a sideways jog pricing pattern into next week, perhaps through 1669-1691, probably into the Fed meeting. 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.