SPX S&P 500 Daily and Weekly Charts; Negative Divergence on Daily Chart and Negative Divergence Developing on Weekly Chart

Here are the SPX daily and weekly charts. The stock market remains stubbornly high and buoyant into today's Federal Reserve rate decision of a quarter point that everyone expected. Stocks oscillate up and down in an indecisive fashion after the decision and press conference. 

The SPX daily chart is cooked; stick a fork in it. The S&P 500 is topped-out on the daily basis and will receive a spankdown. The only thing that can save the day is a positive news announcement from the Fed, or government, or perhaps a bank, that may delay the top a day or two more.

Price makes the matching and higher high while ALL the chart indicators are sloping downward (red lines) forming universal negative divergence. She's out of gas. There are not even fumes remaining anymore. The tank is bone dry so there is no more fuel to take price higher on the daily basis. It is time for a smackdown. The RSI and stochastics are also overbot agreeable to a pullback.

Price is extended above the moving average ribbon requiring a mean reversion lower. The upper standard deviation band is violated so the middle band, also the 20-day MA, at 4483, is on the table and the lower band at 4356. The Aroon green line shows that 100% of the stock market bulls believe that stocks will go up forever. That's funny. Even better, the Aroon red line indicates that 84% of stock market bears believe that stocks will go up forever.

Obviously, everyone is partying on the bull side of the boat except for Keystone sitting in the only lounge chair remaining on the bear side of the boat covered with a wet blanket. The blue circles show 15 distribution days over the last 7 weeks (the smart money selling (distributing) shares to the dumb money). Those pundits on television telling you to buy stocks are getting rid of theirs at the same time (pump and dump).

Note the orange circles on the daily chart highlighting some gaps down below that will eventually need filled. A couple of them are big enough to drive a truck through (you have to say this cliché when discussing gaps). 

On the SPX weekly chart, price is narrowing up into a rising wedge pattern that is bearish. The red lines show neggie d in place for all the indicators except the MACD line. It is typically the last chart indicator that falls into place when calling tops and bottoms. Waiting for the indicators to all line up together can sometime be like herding kittens.

The RSI, stochastics and money flow are overbot agreeable to a pullback on the weekly chart. Again, the Aroon verifies the rampant complacency and bullishness in the stock market. 100% of the stock market bulls believe that stocks will go up forever on the weekly basis. 76% of the bears believe stocks will go up forever on the weekly basis. It is funny stuff. The bull party is in full swing with the Fed wine and Congressional champagne flowing like water. Traders throw darts at stock pages and buy that ticker symbol long on margin. What can possibly go wrong?

So what does all this mumbo jumbo mean? The daily chart is cooked and topped-out now with the weekly chart almost there. Two more trading days remain in this week. There are three paths ahead and the outcome will likely be clear at 4 PM EST Friday when the week ends and the charts are cast in stone.

First, the daily chart will spank price lower on the daily basis the rest of this week and into next week. However, when this week ends on Friday, the MACD line remains long and strong as the chart shows above (green line). This tells you that stocks will be weak next week to honor the negative divergence on the daily chart but the week after price will come back up for another matching and/or higher high (a down-up jog move on the weekly basis to give the MACD a chance to go neggie d). At that time, the week of 8/7/23, the SPX will likely top out on the weekly basis and a multi-week down move in the US stock market will begin.

Second scenario is the daily chart spanking price lower on the daily basis the rest of this week and into next week. The spanking is quite severe and stocks take a deep dive tomorrow and Friday due to the neggie d on the daily chart. This big drop in stocks over the next couple days will cause the candlestick on the weekly chart to turn red and the red body to drop lower. This activity may result in the MACD line turning neggie d on  the weekly chart over the next couple days. If the weekly chart finishes this week with the MACD flat or sloping down the top is in for the weekly chart and the multi-week down move in the stock market will begin in earnest next week. In other words, you better have shorts on.

The third scenario is happy talk from the Fed, or Whitehouse, or a company CEO or few, that manage to buoy stocks a touch higher. If the RSI and/or MACD line on the daily chart poke higher, that will extend the top on the daily chart by a couple days or so but the charts will again be set up to follow the two prior scenarios.

The first scenario is likely the path ahead. Price should receive a smackdown to the middle band at 4483 and since it is down there it may as well fill the gap at 4450 which is also strong price S/R. The lower band at 4356 is running higher and may form a confluence with the support at 4400 as another downside target for the weakness coming on the daily chart. You get the idea.

Watch the MACD line on the weekly chart since that will tell you the top on the weekly basis and when the multi-week selloff begins. Right now, we are going to experience a multi-day selloff due to the neggie d on the daily chart. Remember, trading is playing multi-dimensional chess and the time frames are the dimensions. 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 8:30 PM EST: S&P futures are up +4. Wheee! Whoopie! Everyone continues buying stocks with both fists.

Note Added Thursday Morning, 7/27/23, at 2:30 AM EST: S&P futures are up +14. Yee-haw! Whoopie! The party expands.

Note Added Thursday Morning, 7/27/23, at 4:00 AM EST: S&P futures are up +22. Nasdaq futures are up +1%. Woo-hoo! Wheeee! More Fed wine over here, please. Tech earnings are creating market joy. The ECB rate decision is on tap which will move markets; that should be 8:15 AM EST followed by Madame Lagarde's press conference. Higher euro=lower dollar=higher US stocks and lower euro=higher dollar=lower US stocks.

Note Added Thursday Morning, 7/27/23, at 5:19 AM EST: Wheeee! Whoopie! S&P futures are up +26. Nasdaq futures +1.2%. Euro/dollar pair pops higher to 1.1137. USD dollar index is down to 100.55 at the lows of the day. The tech earnings, AI orgy and dollar weakness rally continues to begin the day. META pops +8% pre-market. VIX drops below 13 to 12.97. The 2-10 spread is at -96 bips (inversion; 3.87-4.83 = -0.96 percentage points times 100 is -96 basis points or bips) with the US yields at; 2-yr 4.83%, 5-yr 4.10%, 10-yr 3.87%, 30-yr 3.95%. ECB President Lagarde is standing at the free buffet eyeing the bacon, sausage and doughnuts, wiping powdered sugar from her scarf and a jelly stain from her blouse.

Note Added Thursday Morning, 7/27/23, at 8:00 AM EST: Madame Lagarde is on deck as S&P futures jump higher now up +31. VIX 12.98. Euro 1.1135. USD 100.66.

Note Added Thursday Morning, 7/27/23, at 8:47 AM EST: Euro drops to 1.1073 and USD up to 101.08 after the ECB raises by a quarter but the orgy in S&P futures continues up +37. META +9%. Here comes Madame Lagarde to begin the ECB press conference.

Note Added Thursday Evening, 7/27/23, at 6:00 PM EST: Whoopies daisies. The SPX drops 29 points, -0.6%, to 4537. The HOD is 4607.07 and LOD at 4528.56 a 78-point intraday reversal with an outside reversal candlestick. Lots of stupid retail traders jumped into stocks this morning, drinking the AI wine, and then they got raped today. Didn't that Keystone guy say that a spankdown was on tap? Everyone was so happy this morning buying stocks with both fists but that joy faded into confusion and regret as the day played out. As Frank sings in The Real Damage, ".... I started out so happy, now I'm hung over and down...." Well, one day does not mean jack. If you bring up the SPX daily chart you see the neggie d firmly in place despite the gap-up this morning so the smackdown was on tap and as the day played out, and thwack, the slapdown begins in the 2-hour and daily time frames. The neggie d spankdown starts on the daily chart as explained above. If you bring up the SPX weekly chart, remember, the MACD still needs to go neggie d, and that is still the case, but you can see the rise in the MACD line today is flattish. If tomorrow is a healthy down day for stocks, that MACD line may slope down on the weekly chart which means the top is in on the SPX weekly chart and this opens the door to the multi-week selloff that is set to begin anytime forward. Watch the MACD on the SPX weekly chart tomorrow and Monday to confirm if the multi-week selloff in the stock market has begun. I love the smell of napalm in the morning. You know, some day this stock market and crony capitalism system is going to end.