$SPX Daily 02/15/2014

15 de fev. de 2014

SPX up 41pts and 2.3% on the week. I do not expect a repeat, but I do expect that SPX will break above and close above the previous swing high of 1850.84 by week's end. Since we are only 12pts away from 1850, then this shouldn't be too hard to accomplish in the four trading days next week.

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 RSI on the daily chart is in an overall down trend and isn't likely to confirm a close at or above 1850. I have found that if the RSI is in an overall rising trend and you have a negative divergence between price and the RSI that price trumps the RSI. But, when the RSI is in an overall downtrend and if there is a new closing high without RSI confirmation then the RSI 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 CCI and RSI 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 RSI negative divergence with the 20/20 sto about to have bearish cross. More evidence for some type of consolidation Tuesday/Wednesday: i1337.photobucket.com/albums/o663/StockMarketSystem/ES4hour02-14-2014_zpsfff2d708.png