SPX Weekly Chart Overbot Rising Wedges Negative Divergence

The weekly chart shows three rising wedges in play. The red and blue rising wedges identify the current market tops as the end of the road, however, the central bankers keep pumping markets higher. The red lines show negative divergence remaining across all indicators a very bearish indication. The collapses from rising wedges can be quite dramatic. The red arrows show the neggie d spank downs. Negative divergence remains in the multi-month time frame but drilling down to the very near term, over the last couple weeks, a new price high is made last week with RSI, stochastics and money flow negatively diverging making bears happy. However, note the MACD line over the last couple weeks still sloping higher. The bulls want to try and squeeze one more week of upside out.

Thus, equities should come back up after any week or three of selling for one more look at the price highs then creating firm neggie d with the MACD line and creating the top. Since the very near-term MACD line is essentially the only fly in the ointment, it would also not be surprising for markets to simply give up the ghost here forward. The MACD line is clearly negatively diverged and out of gas over this year's time frame so hairs are being split whether price tops out now or in a few day's time.

Price has violated the upper pink standard deviation line so a move back to the center band, the 20-week MA at 1866, and rising, is in order. Note how the upward-sloping 20-week MA and lower trend line connecting all the lows over the last two years are running at the same trajectory identifying the 1865-1900 zone as a major decision area where bulls are happy above 1900 and bears rule the markets under 1865.

The volume last week, for the first down week after three up weeks, clearly outpaces any of the up weeks. This is distribution where Ma and Pa Bagholder are chasing divvy stocks and other plays the talking heads on television are telling them to buy as the hedge funds and other investment houses are selling. Pump and dump. The traders and analysts are telling you to buy when they are on television and then ten minutes later after the camera's turn away, they are selling.

Projection is for equities to top out creating a potential multi-year top a la 2000 and 2007. Price will likely come down to the 1865-1900 battle zone for a bounce or die decision where the men will be separated from the boys. Either the dip-buyers will enter and markets recover and remain above 1900, or, markets will collapse with SPX losing the 1865 level beginning a strong move lower. The chart supports the bear case. The SPX has either topped out already, or, will come back up over the next couple weeks to look at the new highs one more time, then top out and roll over to the downside. Extended and sustainable market downside should lock into place going forward.

Remember, the drops from rising wedges can be very sharp and shocking. An example of a dramatic drop would be seeing the SPX collapse into the 1700's over the next month so fast that everyone relaxed and long are shocked out of their socks. Watch your wallet. Watch the MACD line behavior over the coming days and week or two. 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.