SPX S&P 500 Monthly Chart

The SPX monthly chart was a handy tool for calling the top in the stock market this year. The overbot indicators, red rising wedge pattern and universal negative divergence predicted a smack down which occurs. The recovery is a dead cat bounce since the indicators did not display any positive divergence; they are weak and bleak wanting to see more lower lows in price. The stoch's are crossing down through 50% into bear territory. The RSI bounced from 50% which gave the bulls the rally and sign of life.

The chart is weak and points to lots of weakness ahead for months perhaps a couple years or more. The 18-year stock cycle is in a secular bear from 2000 to 2018 so it would not be surprising to see the stock market down 3 of the next 4 years. The collapses from rising wedges can be quite dramatic. That initial drop on the chart is paltry for a rising wedge. Pulling numbers out of thin air, the rising wedge should send price down to the 1400-1600 level without much effort. Perhaps this dire outcome is on tap for 2016 and 2017?

The SPX is at 2033. The critical 10-month MA is 2045.25 and 12-month MA is 2048.25. The 10-month is followed closely by old time traders that control millions of shares daily. Many algo's use both moving averages in their models providing more street cred. The 12-month is Keystone's "cliff" level that tells you if the stock market is in a cyclical bull market or cyclical bear. Price is under the 12-mth MA at 2048 so the stock market is in a cyclical bear market pattern.

The importance of this 2045-2048 resistance level cannot be overstated. If the SPX moves above 2048, stocks will likely rally into year end. If the SPX remains under 2045, the bulls got nothing and a new leg down for stocks will begin. The monthly chart is ugly and provides no compelling reason to own the stock market on the long side in the intermediate and long term multi-month basis going forward. 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.