SPX Daily Chart New All-Time Record Highs Tight Band Squeeze Bull Flag Pattern Negative Divergence Developing

The central banks are relentless beating the bears senseless day after day. The PBOC announces more China stimulus this evening adding to the liquidity injections announced earlier this week. Global markets are floating in a sea of free and easy money courtesy of the PBPC, BOJ, Fed and ECB. US futures are strongly higher. Copper is higher. The broad indexes are already champing at the bit to explode higher in Friday trading. The SPX prints a new all-time high at 2012.34 and new all-time closing high at 2011.36.

Placing this central bank money pumping aside for a second, let's assess the technicals. The previous daily chart shows the tight standard deviation bands (pink arrows) squeezing out a huge move ahead. We identified the prior moves of from 80 to 90 handles and from the bottom in the 1970's, the SPX would target 2050 and higher if the upside squeeze continues. Note that price is exactly at the top band and the bands are moving out locking in the upside move, however, the bears have a tiny window tomorrow to pull a hard reversal. If the markets continue higher as futures indicate the bulls are going to target the 2050.

The blue lines show a potential bull flag pattern. The first leg is from 1910 to 2000-ish, call it 90 points, then a sideways to sideways lower consolidation occurs, then the second leg begins from the 1970's also targeting the 2050-2070 area. Volume should be a bit more robust to confirm the bullish rally. It looks like nothing but blue skies for the market bulls. Are there any flies in the ointment?

The indicators are not enthusiastic at all about the market rally. The red and maroon lines show universal negative divergence across all time frames except the VST where the bulls are creating energy. The Fed dovishness and Chinese stimulus are creating one heck of a party the last three days. Price would be expected to bump along the upper trend line until the very short term indicators negatively diverge.

The purple boxes for the ADX are interesting since the last strong trend for the SPX was actually the downtrend in late July and early August which ended not due to technicals but due to news; just like this week's rally is caused by all the central banker easy money news. President Putin announced a desire to calm the Ukraine civil war which created the early August bottom. The move up for six weeks, as impressive as it is, only results in an ADX of 17 which indicates that the move up is surprisingly not a strong trend at all. If the tight bands were not squeezing out a strong move, the projection would be a topping out at 2010-2015 in the coming days and a roll over to the downside.

Tomorrow is an important day since it will provide further insight concerning the tight band squeeze. Considering the Chinese stimulus orgy occurring tonight (Thursday evening), the bulls have to be given the upper hand with the 2020-2070 area targeted. If the Scotland vote surprises, that would help the bears but that is unlikely. If the bears are going to stop the upside they have to make a stand on Friday. Otherwise, the bulls will run strongly higher through next week. 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.