This is an update to the situation on the weekly chart of the S&P-500 (SPX), which is our current 'Chart In Focus.' (See original posting)

Just over a month ago, it had looked like the negative divergence on MACD on the weekly chart of SPX, may have been on the verge of becoming defunct. After a stern decline over the intervening period, the strong sell signal has finally completed itself, and this fact does not bode well for the bulls over the intermediate- to major-term, as long as the index remains below its 20-week moving average (1133).

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This is an update to the situation on the weekly chart of the S&P-500, which is our current 'Chart In Focus.' The potential negative divergence on MACD, on the chart of SPX, was first highlighted around nine weeks ago. The sell signal had not completed itself at that point, but with the markets having sold off over the past couple of weeks, a completion is nigh.

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This is an update to the situation on the weekly chart of the S&P-500, which is our current 'Chart In Focus.' (See original posting)

The potential negative divergence on MACD, on the chart of SPX, was first highlighted five weeks ago. The sell signal had not completed itself at that point and it actually still hasn't. But, strictly speaking, it has not become defunct as yet, as well.

Until/unless MACD makes a new high (surpasses the peak made in January), the divergence will continue and, as such, traders need to be prepared for the ramifications of the sell signal, were it to be confirmed. A confirmation will take place if/when MACD breaks below the intervening trough (see thin line drawn in MACD pane on chart).

Potentially huge sell signal on S&P-500

So, just how significant could this sell signal be, if it came to fruition?

The best guess at this point would be that a move to the lower bollinger band (weekly), which is currently at 1050, would be the primary target. That represents a 12-13% drop from current levels. Furthermore, note that such a move would barely represent a corrective move within an ongoing bullish intermediate trend. If instead, the markets are ready to make an all-out bearish reversal on that level of trend, a much larger decline, perhaps to the 900-950 range would be on the cards.

First things first, though. Let's see if the negative divergence can confirm itself, or if it will end up becoming defunct. One way or the other, we're taking on a cautious approach at this point and have provided members with a long list of both Long and Short Stock Picks.

As far as the Options Picks go, we've started to provide more advanced trades such as Put/Call Backspreads and Short Christmas Trees with Puts/Calls, in order to be able to pull off a decent profit if the underlying stock moves in the direction we anticipate, and to get close to breaking even, in the event that it goes the other way.

Sincerely,

Asher Pinto

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The weekly chart on the S&P-500 is our new 'Chart In Focus.'

S&P-500 Weekly Chart

The index has had a great run over the past several weeks. The index hit a low of 1050 in early-Feb and has moved to as high as 1170, this week. A significant development on the Moving Average Convergence-Divergence (MACD) indicator on the weekly chart, threatens a potential reversal to the level of the lows in February, if not to lower levels (perhaps as part of a larger correction, on the level of the major trend).

The development we speak of is a potential negative divergence on MACD, as you can see on the chart. Now it is important to note that this signal is still in the initial stages. A new failure swing low (a breaking of the annotated thin line) is needed in order for the signal to complete itself. If the signal is to be confirmed, it will take place over the next couple of weeks.

So we'll be keeping an eye on the chart and providing updates on this 'Chart in Focus' every few days, until the signal is either confirmed or reversed. Stay tuned!

This is an update to the current Chart In Focus, "Focus on Lower Bollinger Bands," which debuted yesterday.

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New Chart in Focus: The accompanying chart debuts as our new 'Chart In Focus' today.

So it looks like the markets have broken their 20dMAs (to the downside) today and that should mean that a bearish phase may be taking shape on the minor trend, shouldn't it?

Well, we've been pointing to the possibility of a market top for the past couple of weeks - several potential sell signals have been highlighted on the daily and weekly charts - and today's break seemingly confirms those sell signals. While the onus is now certainly on the bulls to prove that they're still in the game, the Bollinger Bands, which have undergone extreme contraction over the past couple of weeks, are providing the bulls with a small chance to yank things back in their favour.

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