SPX Weekly Chart

Do you think the 20-week MA at 1964 and 50-week MA at 1892 are important? Clearly the price action thinks so since last week price touched both of these levels and now sits at the 20-week ready to make an important bounce or die decision. The bulls will receive upside legs for perhaps a few weeks if they can take out the 1964 resistance and hold above. Bears need to hold the 1964 level and spank price lower this week.

The top was an easy call with the three rising wedge patterns, overbot conditions and universal negative divergence across all indicators, and the spank down occurs as was forecasted. The 20-week MA fails, then the 50-week MA, that has not been touched since late 2012, fails. The Fed panicked as usual and since they will not permit the stock market to correct, St Louis Fed's Jim Bullard was sent out to pump the stock market by promising more QE. He did, and the markets place a V bottom and rocket higher with the current upside relief rally. The intraweek spike low to 1820 is when Bullard stepped in to promise the world to the bulls and save the stock market.

The indicators were weak and bleak wanting additional price lows after any bounce but the Fed's easy money is a powerful force. Clearly the recovery rally was not created by positive divergence but instead by Fed lip service. Note the robust volume candlestick during the selloff week two weeks ago. This  price range will need retested.

Traders, analysts and pundits have all become complacent feeding at the Fed's trough for the last six years. Note how far price remains above the 200-week MA at 1533. The SPX has not dropped under the 200-week MA since 2011 during the August 2011 waterfall crash. A move lower is long overdue and price typically overshoots to the downside. Over the next year or two it will not at all be surprising to see the SPX down at 1300-1700.

For the shorter term, watch the 20-week MA to see which way price pivots. The bulls are in control and Fed Chair Yellen, Queen of the Doves, will be promising lots of free money on Wednesday so the bulls have an excuse to continue the happiness. A move above the 20-week MA at 1964-1965 will create bullish upside ahead. If the market bears can hold the line here at 1964-1965, they will begin growling strongly again. 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.