In the previous commentary I included the SPX monthly chart of this bull market which outlined the extreme O/B condition and negative 5 RSI Divergence from the 1687 to 1730 cycle high. It highlights the 91.30 RSI at the 1687 high, and the negative 123 declining momentum divergence with the SPX.
I also said the “The 91.30 5 RSI is the highest of this bull cycle and the risk reward is obviously negative on a technical basis. The last two significant bull cycle declines were preceded by highs in the 5 RSI at 78.5 and 85, but a negative price divergence after an extreme O/B number obviously has more technical significance”.
The 1730 cycle high on 9/19/13 is a +159% advance from the 667 bear market low on 3/6/09, and was obviously a high probability reversal zone on a technical basis.
Since that 1730 high the SPX has declined -4.9% in 14 trading days from 1730 to 1646 on Wed [11:20AM] with the 100DEMA at 1654. The previous two declines for the SPX were both to the 100DEMA, or -7.5% and -4.9% respectively.
Yellen will be the new Fed head of the US banana republic and the democrats are jumping with joy because now they have 100% control of the Fed instead of about 90% under Bernanke. What could go wrong?
The banks are ecstatic because their free money lunch will continue unabated and the “herd” money managers are also because they can just keep their funds indexed to the SPX and enjoy a continued free ride in an artificial market with no correlation to fundamentals or economic reality.
The scare tactics/lies from the Administration and Republicans about the debt ceiling and default etc are just that, but it will be resolved in favor of the market and Yellen will continue the inflated asset Ponzi scheme so the odds favor higher prices.
The high probability SPX trading reversal is from the current 100DEMA [1654], or the 1627-1600 zone, which includes the 8/18/13 low and the 200DEMA at 1602. As I complete this commentary at 3:40PM the SPX has reversed the 1654 100DEMA at 1654 from the 1646 intraday low and is trading at 1660.
The intraday travel range and buying the weakness has been very profitable for day traders using the defined basic trading strategies, so adversity is day trading prosperity for Trading Service members.