$SPX Monthly, 04/14/2014: Similarities between 2000 & 2007 Tops

2014年4月14日

First and most important, I am assuming that SPX will close out April in the red per the bearish rising wedge confirmation in the daily SPX chart. If this assumption proves wrong, then I'll just update the chart at the end of May and see where we are then. In other words, while the monthly chart currently indicates problems ahead, it is all Speculation at this time as confirmation is an absolute imperative in all stock market moves.

On this chart, I have calculated the % difference between the 3 & 9 EMA's as a way to view the loss of upside momentum. I explained most of how and why I've done it this way in a chart I put up at the end of February: tradingview.com/v/Vfag1aUr/ The key is not the % difference itself as there is no absolute number that becomes a red flag but the change in the percentage.

Besides the apparent loss of momentum in SPX, we also have negative divergence in the RSI and, unless SPX rallies into the end of the month, then we also have what Welles Wilder calls a top failure swing in the RSI. This occurs when the RSI dips below the previous trough low of the RSI, which occurred in January. As of Friday, April 11th, SPX was off 56pts on the month and for the failure swing in the RSI to be confirmed, SPX will have to close out the month somewhere around there.

Next, we have negative divergence in the CCI along with the fact that the CCI is below +100, a further sign of weakness.

Finally there is a potential bearish cross of the 20/20 sto in the works. If we do close out the month in the red, the sto bearish cross might not come until the end of May and would serve as further confirmation that we are headed into a decline of several months.

Why is this important? Because the current monthly chart of SPX shares several similarities of the monthly charts from the 2000 & 2007 tops, which you can see at the links below. History need not repeat but it's always wise to be aware of the fact that it might.

1999-2000 Top: i1337.photobucket.com/albums/o663/StockMarketSystem/1999-2000MonthlyTop_zpsd0567f00.png

2007 Top: i1337.photobucket.com/albums/o663/StockMarketSystem/2007MonthlyTop_zpsc10cb271.png

Bookmark those links or do a screen capture and use for reference.

Be careful and GL in the week ahead.