SPX Monthly Chart Overbot Rising Wedge Negative Divergence

The monthly charts all receive new prints on Friday. The SPX logs another up month continuing to tease the top trend line of the red rising wedge. The SPX prints a new all-time intraday high at 1924.03 and new all-time closing high at 1923.57. Getting negative divergence to set up in all time frames for all indicators can be tricky like herding kittens. But a market top, that is very likely a significant multi-year top, is very close. The central banker money is powerful and has nullified any chance of a market downturn of any significance for the last 200 handles.

The tops are straight forward enough to identify as they occur but the markets are displaying rare behavior by staying elevated for months on end (due to central banker easy money) and refusing to back test moving averages as would be typical market behavior. The rally from the March 2009 bottom is now 5 years and 3 months long one of the longest market rallies in history that desperately needs a rest.

Money flow is cooked both from the 2007 top to now and over the very short term (last few months) with negative divergence. Ditto the stochastics that are overbot and keep bumping into the ceiling and have no where to go except down. The RSI is negatively diverged compared to the 2007 top as well as over the last several months but over the last three months has eeked out a smidge of long and strong behavior. The histogram is negatively diverged for the last four years wanting to see price drop. The bulls latch on to the MACD line, however, and ride this indicator upwards. Note that the MACD line continues to slope upwards so even after a pull back in the monthly time frame price likely wants to come up for another look at these levels, when the RSI and MACD line should then be firmly negatively diverged, and then begin a more substantive and extended long-term down move.

Therefore, a jog move would be expected going forward (down-up-down) where price drops due to the ongoing negative divergence, then recovers due to the long and strong MACD line, then rolls over creating a multi-year top as all indicators will be negatively diverged across all time frames. Thus, a reasonable projection is down in June, then a recovery in July placing a multi-year top. The alternate projection is that markets simply place the multi-year top at the current price levels and head lower from here for the months and perhaps years ahead.

Remember, the collapses from rising wedges can be quite dramatic. The vast majority of traders are very complacent and worry-free, as evidenced by the low VIX and put/call ratios, and do not expect any pull back of any significance to occur. The Fed wine is flowing like water. 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.