The thin blue lines show the upward-sloping channel in play and how price obeys the various intervals. Right now price is sitting on the second from the top thin blue line deciding if it wants to touch the top of the channel again at 1700-1710. The green lines and falling wedge in June identifies the bottom but a cheesy bottom it was. Stochastics were barely oversold and RSI and MACD line wanted to see lower prices not higher prices. But the Fed heads were out in force day after day pumping QE which established the bottom, then the BOE and ECB fired the money bazooka's on July 4th Independence Day creating a fireworks rally from 1610 to 1685 in a heartbeat, only about one-week's time. Then Chairman Bernanke pumped the markets with the Congressional Testimony (equities are typically buoyant through the semi-annual Fed testimony) to create the move to near 1700 falling one-point shy at 1699.
The maroon lines show negative divergence across all indicators across the three-month time frame indicating that this move higher in equities has less oomph than May's rally. The top a few days ago was a three-day intraday top with price threatening a 1700+ break-through but falling short. This 3-day drama satisfied the small momo remaining in the money flow and MACD line so price really has no reason to move higher. The negative divergence has rolled price over to the downside and the stochastics, RSI and money flow are starting to print lower lows to create a weak and bleak profile. Technical-wise, price has no need to move higher but if Bernanke coughs and it sounds like QE the SPX will be up and over 1700.
Watch to see if price wants to come up for a look at 1700+. If so, monitor the thin red lines in the margin for the indicators. If price prints a higher high than last week, but all the indicators remain negatively diverged (under the thin red line), markets will roll over to the downside. If any of the indicators print above the thin red line, then the bulls will have juice for a few more days forward. Projection is for the SPX to roll over at any time forward and move sideways to sideways lower for the weeks ahead. 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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