SPX S&P 500 Daily Chart; Falling Wedge and Positive Divergence Developing

The US stock market receives the neggie d spankdown previously described and forecasted on the daily chart (red lines). There is nothing difficult about calling a top. You have to wait for price to make matching or higher highs and when that occurs, ALL the chart indicators must be sloping lower. Easy-peasy. The bulls are calling the stock market Kind of a Drag.

The blue stars show how price was overextended to the long side above the entire moving average ribbon so a mean reversion lower was on tap going forward. Price also tapped the upper standard deviation band so the middle band, that is also the 20-day MA at 4530, was on the table and achieved, and the lower band is also on the table at 4451 and this is achieved on Friday with that low at 4444 (quad 4's).

The ADX pink box shows that the strong trend higher for stocks on the daily basis has ended. The rally in SPX was confirmed as a very strong trend higher in early June pointing the way to more partying for bulls, which occurred. But alas, the ADX falls below the high 20's, where a strong trend higher, or lower, is identified, and the strong trend higher for the SPX is now done.

Price collapses during August into the green falling wedge a bullish pattern. Note how price at 4464 and a LOD Friday at 4444 pauses at the confluence of the 50-day MA support at 4438 and the bottom band line at 4452. This was mentioned in the previous post as a potential magnet area for price, and it was, so it makes sense that price may want to bounce for a day or two while the critical bounce or die decision is made at the important 50-day MA.

The SPX is making lower lows so the indicators can be assessed for potential positive divergence developing so the bottom can be predicted. As price drops, the RSI, MACD, ADX and ROC are all negatively sloped remaining weak and bleak wanting to see lower lows in price going forward on the daily basis. The histogram is flat, ditto the stochastics and the money flow is sloping higher positively diverging against the falling price, wanting to see price bounce for a day or few. The stoch's are also oversold agreeable to a bounce occurring in price right now.

The stronger money flow are the dip-buyers. They cannot help themselves and with all the ongoing bullish chatter in the media each day, itchy fingers want to buy those dips because they expect a big rally into year end. That is what the highly-paid Wall Street analysts say but none of them called the top in the stock market like Keystone did.  Are you in the happy bull camp expecting blue skies and rainbows ahead or are you pulling up stakes and moving on? Investors and traders become chart technicians during difficult periods; jackasses all. Many are buying the dip based on price bouncing off the 50-day dubbing themselves as chartists.

The falling wedge extends a bit further with the apex so there is room to squeeze in another couple of lows. 4400 is strong price support. Keystone's 80/20 Rule says 2's lead to 8's on the way down so 4420 is critical since it would open the door to 4380. Therefore, 4420-ish may be a logical place to bottom. You do not have to guess; simply wait until all the indicators are possie d and then you can call the bottom.

The new moon peaks on hump day this week and stocks are typically soggy moving through the new moon. It is the darkest time of the month so war activity in Ukraine will ramp up in the coming days as the night vision goggles flip down, the night scopes flip up, and it is time to shoot through the pitch-black darkness catching enemies off guard.

Housing Starts are released on Wednesday morning and are uber important to the path ahead. The United States remains in a housing recession since Christmas. America is also in a manufacturing recession currently. Stocks are elevated and folks are happy since the upper middle class and privileged elite are keeping the economy afloat; they are the ones that benefited greatly over the last 14 years due to Fed money printing at the expense of the rest of the country. Be glad the crony capitalism system is in its last throes.

Continental Tire in Europe had bad news a few days ago with weak guidance provided for both Europe and North America. If you do not need rubber and tires folks, that means cars and light trucks are not needed. TSLA, F and GM will require close monitoring. It means that big earth moving machinery is not needed. Every project starts with a hole in the ground. CAT and DE stocks are in euphoria mode so they may have to rethink the road ahead if tires, like heroin, is so passe.

The previous posts discussed the importance of the SPX weekly and whether or not it is negatively diverged (because it paints the picture forward on a weekly basis). Well, is it?

The daily chart above hints that stocks may experience a relief bounce for a day or two, and then, perhaps with the timing of the new moon mid-week, roll over for lower lows and place a bottom on the daily basis once possie d forms. 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 Saturday, 8/19/23: DE stock collapses -9% during the week. It appears that Deere got the tire memo. "Nothing runs like a Deere," except Uncle Johnny at the old folks home after taco night.