SPX Monthly Chart Overbot Rising Wedge Negative Divergence Multi-Year Top At Hand

Remember at the end of September, the SPX monthly chart was finally negatively diverged across all indicators indicating a multi-year top at hand. The huge central bank-driven rally over the last three weeks creates a positive month for October (the hanging man candlestick) and new highs but the negative divergence remains. As the SPX prints a new all-time intraday high at 2031.61 and new all-time closing high at 2031.21 both on 11/6/14, the negative divergence remains (red lines). Therefore, a multi-year top is expected to be in place now. It is surprising that the stock market came back up but not so much when you realize the central banks have been pumping stocks for the last six years. Interestingly, the move up is only serving to confirm the multi-year top since the neggie d remains. The end print for this month will be extremely interesting on 11/28/14.

The overbot conditions, wicked and ominous red rising wedge and neggie d all conspire to create market weakness moving forward for the months perhaps year, two years or more ahead. The 18-year secular bear market cycle remains in play 2000-2018 so it would not be surprising to see the stock market down three of the next four years. The collapses from rising wedges can be quite dramatic. Price has violated the top standard deviation band late last year and this year so the middle band at 1824 and rising and lower band at 1541 and rising are in play. The recent sell off teased down towards the middle band (20-week MA at 1824) but it was a cheesy test and this moving average needs to be shown far greater respect. Note how price has remained above the moving averages for years due to the central banker pumping. A mean reversion will occur just as night follows day and prices will print far under the moving averages in the years ahead. Pay close attention to the key 10-month MA at 1946 and 12-month MA at 1924. It is lights out for the stock market if the 12-month MA fails.

Pay attention to the MACD cross as the months play out. That will serve as confirmation that the multi-year top occurred. The pink boxes show that the down trend during the market crash from October 2007 through March 2009 was a stronger trend than the whole six-year rally move higher fueled by the central banks (ADX of 43 versus 39, respectively; blue lines). So all that obscene stock market pumping can not overcome the unresolved power to the downside from years ago, and, the ADX is rolling over now down to 34 showing that the long multi-year rally up trend is weakening.

It has been like waiting for Godot for the market bears. The market bulls continue winning since the correct trade is to rape the stock market for all its worth courtesy of the Fed and other central bankers, however, the technical's say the multi-year historic rally is cooked. Do not get greedy looking for much more upside. Do not listen to anyone that mocks you if you hold cash as a position. It is prudent to get out of the way of the oncoming freight train. Remember, the collapses from rising wedges can be quite dramatic. The multi-year stock market top is at hand.

If the globe and the US fall into a deflationary event a la the Great Depression, those holding cash will be crowned kings with so many bargains available you will not know what to buy while those that are heavily in debt and overextended financially will not be able to buy any bargains. The next couple years may be a crazy ride in the markets. 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.