SPX S&P 500 Weekly Chart; Expansion (Megaphone) Pattern

The SPX topped out in late September just as Keystone forecasted. The red lines show the negative divergence across all indicators, the overbot conditions and the ominous rising wedge pattern that create the smackdown. Keystone had warned of the pending doom since the SPX monthly chart was set up the exact same way. Any analyst or money manager touting rainbows and blue skies ahead back then, which are many, are dolts since all they had to do is look at the weekly and monthly charts and they would have never steered their clients into a ditch like they did. The SPX crashed -20% into the start of this year.

The blue megaphone, or expansion, pattern remains in play. It was shown on the daily charts but here is a look on the weekly. The megaphone handle is added to complete the effect. If price collapses from this vicinity, the lower target is 2000-2100. That would get everyone's attention.

Last week, the S&P 500 prints a doji candlestick which typically indicates a trend change. You will have to wait and see if it does over the next week or two. Note the doji top in early June that did mark a top back then.

Price fell like a stone in December. Santa Claus slipped on the sidewalk and hurt his back. The elves were saddened after looking at their 401k's, that are now 201k's. The MACD line and money flow indicators were weak and bleak clearly wanting another low on the monthly basis, after any rally would occur for a month or so.

The Federal Reserve and other global central bankers would have none of that. Price went down to test the 200-week MA at 2350 back then and bounced (pink circle). The central bankers did not want to risk a retest of the 2350 since if it failed, the global stock markets may slide into free fall. The 1/3/19 selloff triggered panic between Powell (Fed), Draghi (ECB), Carney (BOE), Kuroda (BOJ) and even Yi (PBOC).

The PBOC immediately cut the triple R's which will increase lending and stimulate the economy. Powell and other Fed members, even hawkish ones, started flapping dovish wings. Draghi is open to more easy money ahead. The BOJ does not plan to change their accomodative monetary policy. Other global central bankers join the dovish party. The world is awash in liquidity. Life is a party for the wealthy class constantly reaping the benefits of central banker largess in this new and corrupt Gilded Age. Always remember, the central bankers are the market.

The SPX begins the multi-week recovery rally in January purely off of central banker dovishness and US-China rosy trade talk. Last week, price prints the higher high while the RSI and money flow languish. The MACD line and stochastics, however, remain long and strong wanting to see price print another high. Thus, a near-term top on this weekly basis may be a week or so away. Price may want to chop sideways and keep teasing that 50-week MA at 2730. The critical 12-month MA at 2728 verifies that the stock market is in a cyclical bear market right now. The importance of the 2728-2730 resistance is big-time; it is for all the marbles.

The ADX purple box shows that the long rally in stocks was a strong trend higher until July 4th of last year. The multi-month and year rally fizzled with the last of the fireworks. Stocks continued higher in July, August and until the end of September but the ADX already told you the strong trend higher was over. Keystone highlighted that back then and it was another tool indicating that the major stock market top was at hand.

As stock sold off in the Q4 crash, the trend just started to develop into a strong trend lower as the new year began, but, as explained with the central banker largess above, stocks rocket-launched higher on easy money. The bulls need price to continue higher and for the ADX to turn around to the upside and move above 30 and higher to prove that the upside trend is strong. Otherwise, it is not. The bears need to push the SPX lower in price pronto and curl the ADX higher above 30 moving higher to prove that the price trend lower is a strong trend; the bears may need a few weeks to pull this off (fighting back against the central bankers is not easy; resistance may be futile).

Interestingly, the Aroon has not yet displayed a positive cross. That is surprising considering the strength of the multi-week rally. You would think that was a given. The Aroon still shows the bears in control since late October. 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.