SPX S&P 500 2-Hour Chart

The green lines on the price chart show the expansion pattern playing out with the brown dots price moving from the upper trend line to the bottom then back again. The expansion pattern is also called a megaphone pattern. Now that price is at the bottom a stabilization may occur with a move higher coming soon. The green lines show positive divergence for the indicators across the last month time frame, however, the MACD line and histogram are weak and bleak. Ditto for the very short term few-hour moves showing lower prices desired after any bounce occurs (red lines).

Thus, it may take from 1 to 4 candlesticks to place a bottom in price with the indicators universally positively diverged to create the bounce. This equates to 2 to 8 hours of trading time. This would take the stock market through today's action and into Monday lunch time. The CPC put/call chart posted a couple charts ago shows that a near-term bounce is desired very soon so markets should seek a bottom say this afternoon or on Monday.

Traders may take on a wait and see approach today into the weekend. With the SSEC Shanghai Index dropping to near 3500, losing the critical 200-day MA at 3650, the PBOC may step in this weekend to goose the market with more stimulus (rate cut or triple R cuts) and defend the 3500 level. If so, stocks will likely rally strongly on Monday. If the Beijing communists are quiet all weekend long, stocks will likely open very soft on Monday and perhaps seek new lows.

The tight standard deviation lines squeezed price lower (pink) and price has violated the lower band so a move back to the center band is now in play at 2075 and dropping. Prior charts highlight key moving average and other resistance levels, especially the 2057-2061 level, so keep that in mind when price recovers. The middle standard deviation band, which is also the 20 MA, is dropping like a stone so on Monday or even later today will be fallilng towards that 2057-2061 area so price will likely bounce to back test this area. The 2059 is where the SPX started this year.

Thus, mixing all this mumbo jumbo together and sprinkling magic dust on it, the SPX will likely move sideways bumping around here or lower at these levels into this afternoon where a near-term bottom occurs either later today or on Monday. Make sure the MACD line turns possie d (the MACD begins sloping up with price printing matching or lower lows) which will tell you the bottom is in. Until then, price will languish lower. The SPX drops to 2009 as this is typed at the lows of the day down 26 points, -1.3%. Bears are biting off chunks of bull flesh. 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 Saturday, 8/22/15: Stocks fall into a mini-crash event on Friday afternoon, the SPX collapses to 1971 under this year's low at 1980. The indicators on the 2-hour chart above continue to slope lower and have not developed positive divergence as yet. A firm bottom remains 1 to 4 candlesticks away which is 2 to 8 hours of trading time which would encompass all of Monday's trading and potentially into Tuesday morning before the bottom is in. The VIX, CPC and CPCE put/call ratio's and other indicators signal a near-term bottom at hand, however, everybody and his brother is now expecting a bounce so it may take a couple days while more weak hands are shaken out. The stochastics on the 2-hour are positively diverged which should create a relief bounce on Monday but other indicators would like to see lower lows in price after the bounce occurs for a couple hours. The wildcard is China and if stimulus is announced this weekend which will likely catapult stocks higher. So far, the Beijing communists are quiet.