SPX 60-Minute Chart 200 EMA Cross Falling Wedge Oversold Positive Divergence Developing

Stocks are bludgeoned with price dropping into the green falling wedge (a bullish pattern). Price loses the 200 EMA at 1964.51 ushering in the market mayhem as forecasted in the prior chart. The market bears will slap the bulls silly day in and day out--unless the SPX recovers above the 200 EMA. Price is violating the lower standard deviation band so a move back to the middle band, at 1961.49 and dropping, is expected at a minimum going forward. There is strong S/R over the last day at 1942-1943 so it is reasonable to expect a recovery bounce to this level especially with the uber low NYAD.

The indicators are oversold and stochastics and money flow are positively diverged which will create the initial bounce. The falling wedge also points to a relief rally near. The RSI, histogram and MACD line, however, are weak and bleak so a lower low in price would be anticipated after the initial bounce. The indicators should then set up with possie d across the board leading to the recovery move to 1943 then to the 1955-1961 area. The SPX would be expected to place a near-term bottom today so traders can catch their breath. Bears rule the markets for the hours and days ahead as long as the SPX stays below the 200 EMA at 1964.51. The market bulls will regain control above the 200 EMA.

Due to the critical importance of the 200 EMA on the 60-minute, a back test is definitely expected either today or Monday where price will either bounce or die. With the 200 EMA drifting lower at 1964 a serious battle zone is in place at 1955-1965. Bears win big if they remain under 1955 into early next week. Bulls will recover and slap bears in the face if they move above 1965. 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 Sunday, 8/3/14, 2:39 PM: The SPX continues 6 points lower to 1925 with an intraday low of 1916.37--keep an eye on this number. Positive divergence is set up or almost there as highlighted above so a bounce from 1915-1923 is anticipated. The middle band is 1943.80 and dropping so a recovery bounce to the 1937-1943 level is on the table and remember, a back kiss to the 200 EMA at 1961.93 and dropping remains on the table creating a zone of resistance at 1955-1962.