SPX S&P 500 Daily Chart Overbot Negative Divergence Rising Wedge Upper Band Violation

The previous NYMO chart at 94+ calls out a near-term market top at hand. Ditto the low CPC put/call ratio at 0.80 indicating complacency and a near-term top in play going forward. The TRIN Arms Index collapsed to the 0.4's yesterday verifying over-the-top bullishness and a reversal in trend needed. In addition, anecdotal sentiment has traders and investors jumping into the long side now convinced that a firm bottom is in for stocks; exactly the perfect time to pull the rug out and smash stocks lower. Now that a few tools are hinting at a pullback, what does the SPX 2-hour chart say?

The stochastics are overbot and the rising wedge pattern are bear-friendly. Ditto the neggie d (red lines) that want a spank down. The money flow may have a hair of very short term strength so price may play around for an hour or two at these levels before rolling over. The SPX has violated the upper band (pink) so a move back to the middle band at 1959 and rising is in play.

The expectation is for a pull back to occur now but it may require very nimble trading. Keystone brought on short-term short index plays yesterday and will add to the shorts today if the SPX rallies higher (as long as that negative divergence remains in play). The SPX may flush quickly lower to 1958-ish, you will have to scroll back to the SPX S/R missive to see where the support/resistance levels are at, and then a recovery. The SPX daily chart likely wants another high so the anticipated pull back may be short-lived. Nonetheless, it may be a 25 to 100-handle quick dump. The 1951-1961 level may be a good initial target zone and then see how price reacts.

As always, the above analysis with a bearish expectation in the near-term can be nullified with any positive news, perhaps a big push higher in oil prices and/or a happy jobs report tomorrow morning. 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.