SPX Weekly Chart Rising Wedge Overbot Negative Divergence

The bears have been raped by the Fed over the last year but the theatrical drama is reaching the final Act III. Price is squeezing into the apex of the long-term rising wedge. The collapses from rising wedges can be quite dramatic. Price has violated the upper band at 1957.69 so a move back to the middle band, the 20-week MA at 1874.65, and rising, is required at a minimum.

For the last few weeks the selling volume rules the roost. This is distribution where the smart money is exiting the market on the week after a lot of upside joy like the prior week. The television pundits whip folks into a buying frenzy, like now, so Aunt Agatha took her entire life savings out from behind the antique mahogany vanity and placed all of it in utility stocks. The hedge fund man, waxing kindness, said he has some shares he can provide for her.

The red lines show the neggie d desiring another spank down but note the MACD building some long and strong juice for the VST. This may delay the market top for 1 to 3 weeks where firm neggie d will exist across all time frames; but overall the chart is currently negative. Today's action is important. The bulls can push things higher with the RSI poking higher so check that after today's closing bell. The projection forward is lower prices with two potential paths provided. The dark blue path sends price lower from here targeting the 1870-1910 area. The light blue path shows the same sell off over the coming week or so occurring but a recovery back up to the highs again and then extended roll over to the downside targeting the 1870-1910 area.

Considering the ominous rising wedge pattern, and the goosed nature of markets by the Fed with the complacency at record levels, a black swan event cannot be ruled out as well as a flash crash event. Incorporating the low volatility and low put/call ratios into the analysis, where the CPCE is at multi-year lows, the markets may very well be placing a multi-year top right now like 2000 and 2007. A prudent path forward is to sell long positions, develop a larger cash position and scale into shorts. 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 9:53 AM on 6/21/14: The SPX prints new all-time highs to end the week. The new weekly high comes with a long and strong MACD line, histogram, and now money flow, in the VST only (over the last couple weeks). Overall, in the multi-month time frames, the chart remains negatively diverged across all indicators. Therefore, a spank down week should be on tap, but the indicators want price to come back up again to current levels, then the neggie d should appear for the VST as well. So a pull back is in order but the SPX will likely then come back up a week or two later to the current highs again which would then be the candidate for the top that leads to more extended downside and a potential catastrophic collapse from the rising wedge. The expectation remains for equities to place a significant top at anytime now through the next two or three weeks.