SPX S&P 500 2-Hour Chart; Overbot; Rising Wedge; Negative Divergence

The SPX 2-hour chart topped-out on Friday with negative divergence the money flow is flat. S&P futures are down -33 points about 3 hours before the opening bell for the US regular trading session. 

Traders are getting squeezed out of their shorts creating upside bull fuel and at the same time hesitant long traders feel they have no choice but to buy some stocks since markets are on the move higher. The Federal Reserve rate decision is on Wednesday afternoon when King Powell brings the tablets down from On High to tell traders how to trade. Such is the crony capitalism system.

Stocks are usually up about 80% of the time the day or two in front of a Fed decision, thus Tuesday and Wednesday would be expected to be up moves for equities. This leaves Monday, today, as the window for bears to take things lower and they are. Note, however, the money flow is long and strong so after a pullback in the 2-hour time frame, the SPX will still want to make a higher high in this time frame.

In addition, the MACD is neggie d over the last couple weeks but it is trying to make its way higher in this very short-term (VST) time frame. If you bring up the SPX daily chart, the RSI and MACD are long and strong wanting to see another matching or higher high in price in the daily time frame, after a brief pullback.

The SPX starts the week at 4071 testing the tops from early September and early December. If you bring up a weekly chart, as price prints the matching highs, the RSI and MACD remain long and strong wanting a higher high in the SPX on the weekly basis. The SPX monthly chart is trying to chop sideways but with the weak money flow, and the RSI never reaching oversold territory, there is likely far more stock market pain ahead on the monthly long-term basis (this year).

Trading is a constant balancing of the time frames playing 5-dimensional chess. The 2-hour says down today, which the futures reflect, but then stocks will likely recover on Tuesday and then float higher into the King Powell show. All bets are off then since obviously, Pope Powell may bequeath vast riches upon the wealthy stockholders, or, he may create confusion causing stocks to collapse. Typically, it is best to remain in waiting mode, or even lighten up on positions or take some profits, before King Powell reads his decree.

The charts want matching or higher highs in the SPX in the hourly, daily and weekly timeframes. So the guesstimate forward would be that stocks rally later this week and for the next month but the environment should be choppy and centered around the critical 12-month MA at 4037-4040. Watch this level like a hawk since it tells you the stock market direction for the months ahead.

On the SPX weekly, the RSI is at 55% not the 70% overbot level so that is something on the table (for bulls). The stochastics are overbot right now. The weekly chart has to be monitored since negative divergence will tell you when the top is in. The SPX will likely be soggy for a week, then rally for a week to new highs, the RSI and MACD will run higher, then down a week, then back up a week and perhaps the indicators start to top out, then say, another jog move, down up, so the SPX may be headed for its next significant top about 3 to 8 weeks out. Of course this window will narrow and the top can be pin-pointed and called when the weekly chart goes neggie d.

What's all this mumbo-jumbo talk mean? Whatchu talkin' 'bout Willis? Stocks will likely continue their choppy trek forward but will make higher highs on the weekly basis probably until a significant top in late February early March. The charts will show the path forward. A move higher well into March, maybe April, or even May, may be on the table but that can be known in probably 2 or 3 weeks with the progress of the negative divergence on the weekly chart. 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 12:13 PM EST: The spankdown continues with the SPX at 4043 testing the critical 4037-4040 support gauntlet.

Note Added Tuesday Morning, 1/31/23, at 9:03 AM EST: SPX drops to 4018 in the Monday session. Bears cheer.

Note Added Tuesday at Munch Time, 1/31/23, at 12:01 PM EST: SPX pops to 4044. Bulls cheer.