But first, we are extremely overbought short term. The RSI's on the 60min charts of SPY , QQQ , IWM , DIA , and the $SOX index are all well above 70 which indicates the need for a cooling off period early next week. Should consolidate on Tuesday but could last into Wednesday. Also Zweig Breadth Thrust is at 62.87 showing extremely overbought and readings above 60 usually precede a cooling off period of one degree or another.
Next, the on the is in an overall down trend and isn't likely to confirm a close at or above 1850. I have found that if the is in an overall rising trend and you have a negative divergence between price and the that price trumps the . But, when the is in an overall downtrend and if there is a new closing high without confirmation then the negative divergence trumps the price and this non confirmation becomes a red flag and perhaps a major red flag. So this is going to be important to watch at 1850 and above.
While I do believe it's possible for $SPX to reach the 1880/1890 area in the next couple of weeks, I also believe that headwinds will increase once we breach $SPX 1850. This is because of non-confirmation of and indicators in the weekly and monthly time frame. This is going to be extremely important to watch at the end of next week because non-confirmation of these two indicators in the weekly and monthly charts often occur prior to market declines. I will put up a $SPX monthly chart at the end of next week to explain and illustrate what I mean.
GL in the week ahead.
ES 4 hour chart showing negative divergence with the 20/20 sto about to have cross. More evidence for some type of consolidation Tuesday/Wednesday: http://i1337.photobucket.com/albums/o663/StockMarketSystem/ES4hour02-14-2014_zpsfff2d708.png
I have a couple questions: 1) What RSI confirmation would you be looking for at a new high? 2) I use MACD and was wondering if you use it and what you think of it?
Thanks again - I think your analysis and candor is among the best out there.
Now, with momo strong to the upside, $SPX is likely to close above the swing high of 1850 but neither the RSI nor the CCI are likely to confirm. RSI may only get to 65 or so and this would be, in my eyes, a major negative divergence. However, and very important, nothing happens without confirmation so if the RSI gives a signal of negative divergence but $SPX ignores this and continues its move up, then the RSI signal would have to be a considered a false signal. A few more days of upside would certainly push RSI up and most likely negate the current down trend. In other words, just because we get a negative divergence in the RSI & CCI doesn't mean the end of the world but it does mean one has to become hypervigilant for the next several sessions until we see how things shake out.
As usual, thanks for your comments and GL