This month is looking a lot like last month. Stocks staggering sideways like the drunk in Times Square last evening. The US stock market is at a historic top but, as all these charts have explained the last few months, you have to wait for that pesky MACD to go neggie d before the top can be confirmed (blue circle).
All other chart indicators are in negative divergence (red lines) with overbot conditions agreeable to a multi-month smackdown ahead. Price made the matching high as compared to August so it is all systems go for a neggie d spankdown, in this case a multi-month if not several year beat down in stocks, except for the MACD. There are 3 trading days remaining in September so a big downdraft move in stocks in the week ahead may be enough to pull the MACD lower into negative divergence but it may be too tall of a task in the limited time.
With all the wild choppy ups and downs this month, the MACD went neggie d a few times but it was then stick-saved to still show the upward slope in the blue circle. The MACD is in nosebleed territory. The guy selling peanuts refuses to walk all the way up there, into that thin air, to sell a bag of nuts. This means that stocks can simply begin lower and start the multi-month pullback right now without the MACD going neggie d (because it is already in the stratosphere with nowhere to go but down).
October trading starts Thursday so check the monthly chart then because a new candlestick will be showing for the new month. It may be a repeat set-up like the end of last month. Price will remain elevated with matching or higher highs. Bears would be happy with this because any slope lower in the MACD locks-in the negative divergence going forward and the stock market is toast. Remember, you have to wait until you see the white's of their eyes, or in this case the blue circle.
The SPX has tagged the upper standard deviation band so a trip lower to the middle band, also the 20-mth MA, at 6741, and rising, is on the table for the weeks and months ahead. Ditto the lower band at 5552 and rising.
The Aroon is as expected for a historic top. The green line shows that every bull believes the stock market will go up forever and there is no end to the equity glory gravy train. This Train Is Bound for Glory. Everyone is in party mode. The red line is almost back into oversold territory in other words, the vast majority of bears also believe that stocks will continue higher forever, just like the bulls, again, this would be expected at a historic top.
The purple circles show the distribution months where the smart money is sloughing off shares to Amy Sucka, Joe Sixpack, Carlos Bagholder and Fiona Fool. Pump and dump, baby. This is why the Wall Streeter's walk around in $5,000 custom-tailored Armani suits. The investment houses parade across television and internet screens telling you to buy, buy, buy, and they just so happen to have some shares they can sell you. They do not want you to miss out on the fun (said the spider to the fly).
The volume candlesticks show that as retail investors are excited one month, bam, bam, the smart money dumps shares to the dumb money the following month taking advantage of the bullish optimism. Rinse and repeat at a historic top to provide the smart money enough time to ditch a lot of their longs. When stocks collapse, Amy, Joe, Carlos and Fiona are crying in their beer wearing barrels as the fat cats smoke cigars laughing at the average person's greed and stupidity that is so easily manipulated. Are you the dumb money? Are you going to be a bagholding sucker?
Watch the next 3 days to see if the bears can stomp stocks lower and get the MACD to go neggie d, if not, no biggie, check it at the end of the week with the new October candlestick underway. It is exciting with this historic top at hand and we will be in the ominous month of October known for epic crashes. Are you excited? Are you ready or are you drinking the Kool-Aid? Is it the End of the Line? Just some guys hanging around playing their guitars. They show the rocking chair with Roy's guitar where he used to sit and play; one friend gone. 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.
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