Short Term Trading Member Forum

[techcharter]

SPX E-Wave and RSI Divergence

Short term, the rally out of the February 2013 lows looks like a complete e-wave. Long term it looks like Wave 3 of zigzag out of the 2009 lows has completed, and a Wave 4 pullback at least to the 1350 level is about to start.

The relative strength indicator (RSI) is experiencing a negative divergence with respect to the SPX. The first time this divergence happened was the January-February 2013 rally. This second divergence involves the February 2013 top and the present March 2013 rally. I use the RSI is a leading indicator, and look for divergences to help identify setups in both directions.

The stochastics have been in the overbought area for almost a week now, so longs should be on alert.

The MACD difference ticked down, also an alert for longs.

The price is failing to keep up with the upper, widening bollinger bands, a sign of weakness, and a move that ends in mid channel, or crosses completely to the lower channel, which is heading lower. Bearish

The last technical indicator is volume. On a slightly down day, after a long run, it spiked. This type of event generally indicates the end of a trend.

So many indicators are pointing to a near-term top formation sooner rather that later.

http://stockcharts.com/h-sc/ui?s=$SPX&p=D&yr=0&mn=6&dy=0&id=p24440745269