SPX Year Chart Horrors: Simple and Terrifying Bearish Divergence

SP:SPX   S&P 500 Index

The chart is simple:
Black lines show clear bearish divergence. On the first occasion SPX lost about 54% of its gains and over a decades worth of gains. We are in the second occurrence of bearish divergence and the measured move shows the losses to SPX if the low of this downtrend finds support on the resistance set by the blue lines/double top. For your own edification I strictly charge and direct you to look at the S&P and find the times that it has erased over 10 years of gains on a massive dip.

The blue lines double top in price and a massive amount of bearish divergence in the RSI lead to over 55% drop . The first set of black lines show how classic bearish divergence built up over years and finally broke to almost a 53% drop . The second set also shows bearish divergence but rather than building up it shows two clear peaks. The measured move to the previous double top is about 43%.

The MACD shows that the uptrend is slowing down, evidenced by the light green bar on the histogram. By itself that is a minor signal that the uptrend is slowing down, but combined with the divergence suggest the MACD will likewise begin to turn down. The Hull MACD is a much more volatile moving average convergence/divergence oscillator which crosses zero a lot more than the MACD and the fast acting nature can lead to a lot of false signals, especially on lower timeframes. But at the current instance I think we can at least predict a red year based of the Hull MACD having a declining histogram and the H-MACD itself turning down.

Target setting is going to be difficult for a move of this size. The Moving Averages show at severe times that the yearly 20MA is important, and from time to time in the ancient days (the 20s and 30) the 50 has come into play. I think a retracement to the 20 year MA is very possible as it matches the double top established between the ‘99 and ’07. I also consider it possible that many people will watch In horror as the S&P forms a complex head and shoulders after finding support on the 50 year MA, bouncing, and finding support on the 100 year MA. I would be greatly pleased to be updating this same post in 30 years.

But lets not get ahead of ourselves. For you micro-timeframe traders we see that on the 15m the price action doesn’t look good for bulls. The 20MA just crossed under the 50 and shortly I see a cross of the 50 and the 200. I quite frankly I don’t see anyway we don’t get rejected below the 2800 level. Too many rejections at 2,800.

Finally on the TA aspect, the declining volume on the yearly time frame isn't a good sign. Less volume means less interest in keeping the price up. If you look at the VPVR your best hope is the 2200 level holds, and quite frankly, i don't think it will.

Fundamentally, QT has continued at a steady pace, both by the FED and by the BOJ and the ECB, and I don’t think the markets have fully adjusted to the conditions. By fits and starts the markets will adjust to the decrease in money supply and even if the Fed holds interest rates flat while continuing QT is still fundamentally bearish . The dollar will continue to become relatively more expensive compared to equities which will lead to paper gains.

I'mma hold my position in SPXU (a inverse x3 SPX fund) for at least a year.

The two week chart has pained the reversal pattern I thought it would in the comments below. We now have the development of a second lower high and that should lead to a lower low. We can see SPXU is responding as it should and we should see another 80% pump as this inverse x3 the S&P.
This_Guhy Namah-Te
@Namah-Te, Here is the hourly chart with the RSI and the 2w chart. Hourly divergence is already causing topping behavior and over the last two weeks we developed a potential reversal candlestick pattern. I am wagering that in the next two weeks we end up in the red. And a suggestion would be to add volume to your Eliott wave count. Volume confirms everything and volume on wave 5 should be declining.

Cramer ran some TA postulating a weakening dollar. What happens if it’s accurate and the roll off and rate hikes are paused
+1 Reply
This_Guhy FerroIgnique
@rpamundson, QT has been taking $30-50B out of the US money supply for months. ECB and BOJ are doing the same with their currencies. This is going to affect equities negatively. The percent of BBB rated companies in the US is at an alltime high, worldwide debt is at a all time high, the ability to maintain prices isn't there, the ability for companies to take on more debt isn't there (so they can't buy their own stocks). Even with rate hikes paused QT continues.

There is nothing to suggest that QT will lead to a weakening dollar.
EN English
EN English (UK)
EN English (IN)
DE Deutsch
FR Français
ES Español
IT Italiano
PL Polski
SV Svenska
TR Türkçe
RU Русский
PT Português
ID Bahasa Indonesia
MS Bahasa Melayu
TH ภาษาไทย
VI Tiếng Việt
JA 日本語
KO 한국어
ZH 简体中文
ZH 繁體中文
AR العربية
HE עברית
Home Stock Screener Forex Screener Crypto Screener Economic Calendar How It Works Chart Features Pricing House Rules Moderators Website & Broker Solutions Widgets Stock Charting Library Get Help Feature Request Blog & News FAQ Wiki Twitter
Profile Profile Settings Account and Billing Get Help Ideas Published Followers Following Private Messages Chat Sign Out