SPX Daily Chart Upward-Sloping Channel Overbot Negative Divergence Potential M Top

Lots of drama in the markets these days. The SPX bounces through the 1752-1775 S/R zone for the last couple weeks, a 23-handle range. Key S/R is 1775, 1772, 1769, 1763, 1759, 1752, 1745, 1733, 1730, 1722, 1706 and 1697-1698. Price ran up through the all-time closing high at 1771.95 but could not print a new closing high and was also unable to move above the intraday all-time high at 1775.22. The red lines for the indicators show universal negative divergence across multiple time frames which identify all the spank downs, however, the Fed will not allow markets to properly correct and is dead-set on keeping the stock market elevated. Rich Uncle Ben Bernanke is taking care of the wealthy.

The SPX jumped above the top channel trend line 3 weeks ago, and came back for a successful back kiss (for the bulls) then bouncing again to tease new all-time highs. Since price has now printed a matching high, negative divergence is triggered. Look at how far below some of the indicators are (compared to two weeks ago) such as the histogram, stochastics and money flow. Since it is only a matching price high, an allowance must be made for price to print in the small red circle to establish a more firm higher high, but this should only result in the neggie d remaining in place, and another spank down. The pink dots show where the reversion to the mean moves should occur, like now. Price has yet to back kiss the 20-day MA at 1744 and rising and this must occur in the coming days. Using the S/R above, and considering that the 20-day is rising, the 1745-1752 is a reasonable price target in the very near term.

If price drops from here, an M top pattern would be printed and add to the credibility that this top may be more important and substantive than the prior tops. The ECB rate decision is 7:45 AM EST, a short time away, and the more-important press conference at 8:30 AM. The move in the euro will effect all global markets. Stocks will likely move in sympathy with the euro, so if Draghi cuts or is dovish, the euro drops and stocks will likely drop. If Draghi does not cut (which is expected) and does not speak dovishly, the euro will pop and stocks will likely pop with the SPX printing in the red circle. Independent of the ECB's shenanigans on tap, the projection is for price to roll over to the downside from here, or, one last move into the red circle, where price will receive the spank down. 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.

Note Added 5:22 AM on 11/8/13:  The spank down occurs with the SPX dropping 23 points, -1.3%, to 1747, sending price back inside the channel. The LOD is 1746.20 so price comes down to kiss the 20-day MA at 1746-1747 as highlighted above. The initial downside price target at 1745-1752 is hit in quick order.