SPX S&P 500 2-Hour Chart; Overbot; Negative Divergence; Potential Island Reversal

Yesterday, Monday, was busy despite the early close to US stock trading at 1 PM EST. The upside bull rally continues into the July 4th holiday today. Happy Independence Day, as Martina sings Gretchen Peter's grammy-winning song, that had a resurgence in popularity after the 911 terrorist attacks (Roll the stone away! Let the guilty pay! It's Independence Day!), that is actually a tune about spousal abuse and domestic violence (Some folks whispered and some just talked, But everybody looked the other way).

The SPX 2-hour is topped-out so tomorrow will be interesting. The MACD line has a couple of fumes in the tank that may keep price elevated for the first half-hour or so of trading but, barring any positive news, the SPX should peak-out in the near-term right now. The daily chart is also displaying full negative divergence across all indicators and agreeable to short-term weakness.

So as long as the Federal Reserve does not step in again, or data or inflation-news hype does not create joy, or the AI orgy hype does not goose more tech stocks, the technicals want price to roll over lower in the near-term.

The blue island formed when price gapped down and then an island reversal pattern occurred with price flying back up through the same gap. Now price is on the yellow island and time will tell if another island reversal occurs where price would slump lower to 4425, and then collapse, gapping-down to 4400 and trending lower. That is a tall ask and probably would not occur unless some bad news hit the wires. Who knows these days? It may happen tomorrow.

The other outcome is that price simply begins trailing lower due to the neggie d in the hourly and daily time frames and comes down to fill that gap at 4400-4425 that is 'big enough to drive a truck through'. That cliché had to be written into today's analysis. Eventually, all gaps are filled.

The RSI and stochastics are overbot agreeable to a pullback. You can see that even with the very near term strength in the RSI, MACD and money flow, the last couple hours of trading on Monday, those highs remain below the highs from 2 weeks ago (bearish).

The full moon peaked on Sunday/Monday helping to goose stocks. The new moon is on Monday, 7/17/23, when stocks may be weak. Stocks are typically bullish into a holiday and that occurs on Monday. New money typically flows into the stock market to begin a new month (July) especially new quarter (Q3) and second half of the year (H2). So the bulls have a lot going for them into today and the Fed happy talk, happy inflation data and ongoing AI orgy party is more icing on the bull's cake.

Going forward, the bulls will either prove that they actually do got game, or, crumble like a 99-pound weakling. Utilities created the upside in stocks yesterday as per Keybot the Quant robot so focus on the UTIL 910.67 bull/bear line in the sand tomorrow morning. It will tell you who wins. UTIL price begins at 912 in the bull camp above 910.67 creating lift in stocks. Bears desperately need UTIL below 910.67 to stop the upside rally.

UTIL is at a major inflection point right now. If utes rally and UTIL moves up towards 940 and higher, that tells you the rally in stocks will continue. If utes fail below 911 this week, and trend lower, and take out 9 hundo, look out going forward since the US stock market will likely crash during the weeks forward.

Bring up the SPX weekly chart. You can see price creates a matching high for 3 of the last 4 weeks. The RSI, histo, stochastics and money flow are all neggie d. The MACD line is long and strong and wants one more matching or higher high in price that will probably occur either this week or next. This is significant that the weekly chart is also aligning negatively setting-up the start of a multi-week down move likely beginning the week of 7/17/23, maybe sooner.

Again, happy talk and news can change the picture and the charts will quickly adjust. At the same time, if negative news occurs, it will exacerbate the negativity in play or forming in the hourly, daily and weekly time frames, and accelerate the downside. There is going to be fun ahead this month and next.

Bring up the SPX monthly chart. You see the matching high in price so the indicators can be assessed. Remember, the last candlestick is still in progress on the monthly and weekly charts and can change as can the indicators. The MACD line on the weekly chart may turn neggie d this week which would be an extremely negative development for the stock market going forward. On the monthly, the RSI is flat, which is neggie d, but the MACD line, stochastics and money flow are long and strong. After the multi-week down move, stocks will want to come back up again on the monthly basis which hints at more choppy slop for July, August and September.

However, July only just started. If the negativity explained above kicks in, and then the weekly negativity kicks in, the price candlestick on the monthly chart will turn red and drop and the indicators may slump over forming a much more dire outcome ahead where a top in July would be a major top.

Summing up, stocks should pull back in the hourly and daily time frames, and then perhaps some buoyancy late next week only to top out on the weekly basis and begin a multi-week move lower. The monthly chart will dictate if the top is a major top where stocks may slump into year end, or, if stocks come up again one more time, say in September/October setting up the major top. 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.