SPX Daily Chart Negative Divergence Fibonacci Retracements Gap Price Extended Potential Island Reversal

The Veteran's Day trading today was slow with the volume the lowest since the Independence Day holiday. It was a good day to goof-off, or better yet, take a vet to lunch. The red lines show the negative divergence in place across all indicators, which would be expected to create a spankdown, however, the Fed is sending out 3 talking heads tomorrow; Fisher, now turned dove, Kocherlakota, the hawk that turned into a dove a couple years ago, and Lockhart. So the Fed will try to create another pump for the stock market since it is all they got; a one-trick pony. The market top as Halloween approached resulted in a negative divergence spank down but note that the money flow printed that top above 80 and still had some juice that wanted to see another matching or higher price high. Well, price now prints the matching high and money flow is now fully agreeable with neggie d as well wanting to see a price spank down. Tomorrow should be interesting. Even if price sneaks out another high, it should set up the drop from that new level. The black dots show how price is extended above the moving averages requiring a mean reversion (lower prices).

The blue dots show how the pink standard deviation lines are used. Once price tags the outer limit it wants to travel to the middle band, at a minimum, which is also the 20-day MA at 1753.07, and then, as occurred all year long, move to the opposite outer limit and then back again. Price pierced the upper band in October, and came back to test the middle band at 1753.07, but bounced rather than collapsing. Thus, a move to the lower band is still anticipated. This band is 1716.73 and moving rapidly higher. Note the gap at 1730-1733 that remains open and has created an island for price ever since. If price comes down to 1733-ish, and then immediately drops to sub 1730, that would constitute an island reversal pattern. Price may simply want to choose to come back down to fill the gap as well.

The Fibonacci retracements line up nicely with price S/R levels. For the rally over the last month, price would need to come down to 1727.68 to satisfy testing of the 38% Fib retracement. Wrapping this up with a pretty bow, a confluence is developing with the upward moving lower standard deviation line (now at 1716.73 but accelerating higher quickly), the 38% Fib and the gap at 1727-1733. Thus, this 1727-1733 area may serve as a magnet in the coming days. Projection is down but with 3 Fed heads in the wings, donning top hats and ready to tap dance with black canes like Fred Astaire, the bulls may try to sneak out some additional upside, but, the negative divergence should remain in place and spank price lower. The Fed is the markets. 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.