SPX Weekly Chart Lower Band Violation Potential H&S

Over the summer months, Keystone provided the play by play for the market top as it formed with the negative divergence, overbot conditions and rising wedge patterns. In July the bump up in money flow was noted and the potential for stocks to come back up for one more matching or higher high especially since rich Uncle Fed is always there to goose the stock market. Price comes up for another new all-time high in September at 2019. The indicators all went into negative divergence on the higher price prints so you knew the spank down was on tap; and it occurs.

Price fell through the 20-week MA at 1965 and violates the lower band at 1908. Therefore, a move back to the middle band, at 1965 is on the table. Price was very close to the 50-week MA at 1886 and typically when price shows up in the neighborhood it at least wants to knock on the door to see if anyone is home. So markets may create a relief rally but a run lower to continue testing the important 1886-1905 support area may remain on the table for the coming days or week or two. The indicators are weak and bleak across the board. The lower low in price compared to the August low results in lower indicators so lower prices are desired after any bounce occurs. Markets would be toast under 1886.

The RSI and stochastics are under 50% in bear territory. Ditto money flow. The selling volume is robust overtaking all recent buying volume candlesticks so it would be difficult for traders and investors to suddenly turn strongly bullish since the enthusiasm for the upside has waned the whole year. The pumpers and dumpers appear on television daily and encourage retail investors to buy so that allows the smart money to sneak out the back door. The strong selling volume weeks after an up week shows this distribution taking place.

Projection is for a recovery to occur from 1886-1909 perhaps up to 1936-1965 then roll over to the downside again. Note that a move back up would create a head and shoulders (H&S) pattern. The top at 2019 and neckline at 1900 would target 1780-ish as the weeks and months play out. 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 7:12 PM: The SPX bounces today above 1912 then collapses 31 points, -1.7%, to 1875. The 50-week MA at 1886 fails today creating and verifying the market ugliness.