SPX S&P 500 2-Hour Chart; 2-Leg Bull Flag; Negative Divergence; Overbot

Do you smell it? No, not that. Take another whiff. No, not that either. That Smells Like Teen Spirit. Take another whiff. Yes, it is smelling like a top. Today, the bulls rally the stock market in an upward move so obscene it would make Caligula blush. Banks, retail stocks and copper created the bullish joy today sending stocks higher and Outtasite.

Anyhoo, the SPX 2-hour chart is topping-out and Keystone can explain to you how to call the top in the 2-hour time frame and enter index shorts at the right moment. The SPX daily and weekly charts are displaying negative divergence across all chart indicators a bearish development. Conceivably, calling this stock market top in the 2-hour time frame may also be the top call for the multi-week decline in stocks that will begin anytime.

There is a lot of spaghetti in that chart above. It has more red lines in it than Keystone's eyes. For the 2-hour timeframe chart, Stockcharts prints a candlestick at the opening bell at 9:30 AM EST, then the next one at 10 AM, then 12 PM noon, then 2 PM, then back to 9:30 AM again on the next day. Thus, check the chart a few minutes after 10 AM EST tomorrow since two new candlesticks will be showing telling you when the top is shaping-up.

Going back a couple weeks ago, that top call was simple. The red lines show price making a higher high while at the same time all the chart indicators were sloping downward and out of gas, negatively diverging compared to price, so you knew the top was in due to the blantant neggie d. The RSI and stochastics were overbot also telling you that a move lower was at hand. Voila. The neggie d spankdown occurs and price prints lower lows and lower highs.

Price prints a low during the final couple days of May and the histogram, stochastics and money flow are positively diverged, and the RSI and stoch's are oversold, all wanting price to bounce, however, the RSI and MACD line wanted price to make one or two more lows for another day. That did not matter since the Federal Reserve, inflation data, or NVIDIA hype, or all three create a new orgy rally for stocks. Thus, the chart wanted another low but the happy talk and news bounced price at the green arrow without the RSI and MACD turning possie d (an illegitimate bottom).

The bulls run higher and the orange lines show the 2-leg bull flag pattern at play. First leg is 5200 to 5300 one hundo points. The sideways consolidation occurs with a slight downward bias; it is textbook. Then, price bottoms at 5260, thus, adding a hundo, is a 5360 upside target to satisfy the bull flag and voila, the SPX tags 5354 today. That is close enough for government work but price will likely play in this area tomorrow ahead of the Jobs Report circus.

On the right-hand side of the chart, you see the price candlesticks moving higher, higher, higher, printing new highs. Ditto the chart indicators that actually looked a little weaker earlier, but they erected themselves during the afternoon orgy. The stochastics are overbot and agreeable to a top and pull back ahead.

The indicators are long and strong as price makes the new high but watch them like a hawk. The stochastics are cooked; they will turn neggie d by 10 AM. There is likely two jog moves needed with price before the chart can set up with neggie d in the VST (last few hours). That would be down for one candlestick, back up for one for a new price high as one or two indicators turn neggie d, then down, then up again for another high, probably toying with the 5360 bull flag target, and perhaps that will be enough for all the indicators to be neggie d and call the top and bring on shorts. The blue line shows the sideways chop for tomorrow and you will simply have to wait and see if she tops out.

There is something else extremely important in the chart. What is it? What lines have not been talked about? Yes, the maroon lines. They show that the chart indicators are in full negative divergence across the last couple weeks. This is a chart that can top out any minute forward. Tomorrow will be interesting.

Keystone bot some index shorts today and will add going forward. As usual, the chart drama lines up with an important data release which is the jobs. You can see tomorrow's outcome where the chart above goes into full neggie d over the very near term as well as over the last couple weeks where the top is guaranteed, however, the jobs report is Friday morning which may change the information known and screw-up the top call.

If traders do not like the jobs report, the stock market is likely toast as explained by the chart setting-up above. If the jobs report results in bullish joy for stocks, the charts will likely only need a few days to reset up with neggie d as discussed. In other words, a joyous Friday for stocks will likely only delay the top by a few days.

If you want to learn how to call tops in the stock market, this can serve as a good example. All of you following Keystone for many years should know by now how to call the tops and bottoms in stocks and indexes using neggie and possie d, respectively. Remember, in charting, all the same tools work in all the time frames and trading is like playing multi-dimensional chess only with time as the variables (minute, hourly, daily, weekly and monthly time frames).

A guess would be that the stock market tops out tomorrow but the story cannot be written until the Jobs Report. No need to guess, however, simply watch for universal neggie d in the chart above and buy some short index ETF's. 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 Thursday Evening, 6/6/20, at 6:03 PM EST: The 2-hour chart progresses as expected and discussed above. Price displays a matching or higher high for each candlestick today and the chart indicators are neggie d over the last couple weeks and neggie d in the VST time frame (the last few hours) except for the MACD line that is flattish over the last couple hours. She is cooked. The SPX daily chart is topped-out with neggie d across all indicators. The SPX weekly chart is topped-out with neggie d across all indicators. It's over, folks. Stick a fork in it. The US stock market is ready to receive its neggie d spankdown and begin a multi-week move lower. Did you put on shorts today? Did you pull the trigger? AC/DC will tell you to Shoot to Thrill and play to kill. The only thing that can save the stock market now is the US Monthly Jobs Report at 8:30 AM EST tomorrow morning only about 14 hours away. If the jobs report was not on tap, the stock market would begin its multi-week descent. If stocks rally on happy jobs talk, the charts will set up negatively again in a few days or week or two. Are you ready for some fun?