SPX S&P 500 Daily Chart; Potential Island Reversal; Rising Wedge; Negative Divergence; Lower Band Violation

Time to talk about the potential island reversal pattern again. Scroll back for prior discussions about the pattern. The green gap shows price jumping from 5380 to 5410 the gap-up move starting the formation of the island. Pope Powell flaps his dovish wings causing bulls to salivate and buy any stock with a heartbeat. The joyous activity sends the SPX higher to the all-time record high at 5669.67. Sound the Seven Trumpets!

Thus, after the Powell push, happy inflation data, the July 4th holiday joy and more AI hype by Jensen waving a new chip in the air while riverdancing, stocks rocket launch to the record high. That bullish orgy creates a mountain on the island and on the other side of the island a landslide occurs now all the way back down to the shore line at 5400-5410. There are two palm trees on the island now as time moves along. Elvis and the Attractions are on the island looking for light in the darkness of insanity.

There are three paths. Bounce from this strong support at 5400-5410, or, collapse with a nasty gap-down move where price lands at 5380 and lower in a heartbeat gapping back down through the green gap, which would be an island reversal pattern, or, price may simply leak lower slowly filling the gap at 5380-5400.

Price failed to bounce from the 50-day MA at 5432 instead falling through so a back kiss will be needed at some point forward. The upper standard deviation band (purple) was violated for the all-time high so the middle band, that is also the 20-day MA, now at 5545, is on the table as well as the lower band at 5406 and both targets were achieved. Sugar, water, purple, like Chappelle jokes. Since price now violated the lower standard deviation band the middle band at 5545 is now on the table during a relief rally. That being the case, perhaps the island wants to grow a bit longer before giving way.

There are two big gaps above, one at 5500-5550, big enough to drive a truck through it, and another up at 5625-5650. The blue circles show distribution taking place that was the smart money sloughing off shares to the dumb money. Were you one of the bag holding sucka's that were buying stocks up through 7 days ago? The investment houses were glad to give you shares; they cash-out and take the dough while you are left holding the bag. How do you feel, sucka?

The red lines show the top occurring due to the negative divergence, overbot conditions and rising wedge pattern. The rising wedge is textbook with price taking the steep drop from the apex. The money flow is flat indicating that dip-buyers want to step back in but still have cold feet. The RSI, MACD, histogram and stochastics are weak and bleak (sloping down) wanting to see more lower lows on the daily basis. This hints that either the gap fill at 4400-4410 will occur or an island reversal where price gaps down to 5380 and lower.

The 100-day MA at 5287.666 typically acts as solid support when an index or ticker begins to drop in earnest. The 5250-5320 congestion zone should act as support on the way down and the 100-day is inside this range. The chart is weak and bleak as per the red lines. The stochastics are now oversold so they will be agreeable to a bounce in the days ahead. At least 2 up-down jog moves are likely needed to set up a possie d bottom (up-down-up-down for the bottom which would be 4 days out the middle or back end of next week; when Pope Powell takes the stage on 7/31/24). That 5288 is a neon sign flashing. I'm Jumpin' Jack Flash.

The SPX weekly chart topped-out due to neggie d. Scroll back to those SPX charts that explained the topping process. It is all systems go for a multi-week pullback (it has only just started). Trading is playing multi-dimensional chess with time as the dimensions. Thus, the daily chart is weak but should set up for a relief rally starting next week. The weekly chart, however, wants lots more downside ahead on the weekly basis so after a relief rally occurs on the daily chart, the SPX should roll over again and make lower lows on the weekly basis going forward. Your trading positions depend on if you are a day trader, swing trader, short-term or medium-term trader. Use the charts for timing. Medium and long-term, however, it looks like lower and lower stock prices.

The upper band was violated on the weekly chart so the middle band, the 20-wk MA at 5301 is on the table, again in that 5250-5320 support range mentioned above and only a few points from the 100-day MA at 5288. The 5288-5301 is a magnet range from where the daily chart may bounce and try to recover.

The SPX monthly chart is ugly in negative divergence across all chart indicators. Despite the over the top euphoria about the stock market with predictions of SPX 6,000, especially with rate cuts coming, the charts say there is nothing but pain and misery ahead, a la Elvis's song above, for weeks and months, and perhaps a year or few ahead. Are you ready for that? The charts are nasty and interestingly, that upper gap at 5625-5650 may not get filled until 5 years from now; wouldn't that be interesting?

Comically, Pope Powell will ride into the markets on his pale green horse next Wednesday, 7/31/24. Powell will bring the tablets down from On High and tell traders how to trade. He is expected to set September up (9/18/24) for a rate cut but the worry is that he may be waiting too long to cut. Rumor has it that Powell is spotted at the local dry cleaners picking up his white dove suit in preparation for next week. The BOJ decision is also on tap for next hump day which will hugely impact the dollar/yen currency pair and impact global stock and bond markets.

Keystone continues holding index shorts and Keybot the Quant remains short. 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 Friday Morning, 7/26/24, at 6:27 AM EST: S&P futures are up +41 so the bulls are trying to stage a New York comeback, like Lucinda. If you bring up the SPX 2-hour chart, you can see the indicators setting-up with positive divergence explaining the prospective pop in this VST (very short term). The daily chart remains weak and bleak wanting to see lower lows in the daily time frame and the weekly and monthly charts remain ugly and topped-out as explained above. Perhaps the crony capitalism filth is crumbling before your eyes.

Note Added Tuesday Morning, 7/30/24, at 4:29 AM EST: The SPX is at 5464 as Pope Powell is on deck. The 2-day FOMC meeting begins today and Powell will bring the tablets down from On High tomorrow with the rate decision and future path. This week is nutso, probably the most critical week of the year, with major tech and other earnings on tap, the Fed decision and set-up for future rate cuts, the BOJ decision, and the Jobs Report. Stocks rally about 80% of the time on Tuesday and Wednesday going into a Wednesday Fed meeting and S&P futures are up +11 this morning thus far. The ride this week becomes bumpy from here out. Fasten your seat belts as pretty Bette decrees.