Sunday, October 21, 2018

SPX S&P 500 Monthly Chart; Overbot; Rising Wedge; Negative Divergence; Long-Term Stock Market Top in Play

The wild and choppy market action continues. News bites on the Khashoggi murder situation and trade can send stocks up or down on a whim. Treasury Secretary Mnuchin pulled out of the upcoming Saudi Investment Conference late last week and the stock market fell apart. At the same time, the global central bankers such as the BOJ, ECB and PBOC keep printing money to pump stock prices higher to protect the wealthy class. Ditto the Federal Reserve that maintains low rates with the very gradual rate hike path in play.

This is the SPX monthly chart Keystone has been posting and describing all year long to fins out when the long-term stock market top will print. Stick a fork in it. It's cooked. Crispy fried. We were waiting for universal negative divergence to display across all chart indicators; it's here. The MACD line was stubborn as the green line shows. After the September print, the MACD line remained long and strong. Remember the purple circles on the SPX monthly charts? This month, the SPX prints a matching high in price and note the rollover in the MACD line now in negative divergence (price is making matching or higher highs but the indicator is sloping downwards).

All the indicators are neggie d now (RSI, MACD, histogram, stochastics and money flow). The RSI and stochastics are at or coming off overbot territory agreeable to a top. The red rising wedge is bearish. Price violated the upper standard deviation band and has needed to show respect to the middle band, now at 2629, for quite some time. The lower band at 2296 and rising is also on the table for the months ahead perhaps as the New Year begins.

The chart has topped out like October 2007. It would be a surprise to see the SPX come back up to record highs again but the central banks or President Trump may have a trump card up their sleeves. It has been a long 9-1/2 year rally from when the Fed decided to goose the stock market higher in March 2009 to protect the wealthy and spit on common Americans and capitalism. The chart indicates that the party is over on the long-term monthly basis.

Note the heavy selling in February and March. The bulls have not been able to overtake that strong selling volume for the rest of this year thus far and that strength in selling is not equaled until back in November 2016 when the bulls were buying stocks like madmen after President Trump's election. This month's candlestick is already near the bull's volume for the last three months and only 2/3rd's of the days are gone thus far this month.

The thin blue lines show key support levels as the months play out. The blue circle shows five months of congestion at the 2350-2450 range. As a bit of time goes by, that lower standard deviation band will continue higher coming into the 2350-2450 range. The Wall Street analysts and strategists continue proclaiming 3K, 3100 and 3200 targets for this year. Maybe they got mixed up and meant to say 2300. All joking aside, the 2350-2450 is a likely target for early 2019. 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.

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