More divergences...

Tonight I would like to share with you the chart from a slightly longer term view. Below you will find the weekly bar chart of the S&P 500, accompanied by graphs of Stochastics, the Relative Strength Index, and the Commodity Channel Index. This chart offers two additional arguments for a bearish scenario over the next six to eight weeks.

First of all, if we draw a line across the high set in mid-December, connect them with the highs set in February, and then extend that line out to the right, we can see that the S&P 500 rallied right up to the trend-line created by that series of highs. This suggests that the index will experience some resistance in this area beyond that created by the Fibonacci calculations I shared on Sunday.

Next we need to look at the collection of trend oscillators that I have included on this chart and compare them to the price behavior illustrated below them. Here we can see the S&P 500 rallying to new highs and finding resistance from a trend-line created by the recent highs of the index. Meanwhile, none of the oscillators included on this chart is reaching a new high. In fact, you could argue that they are all making a series of lower highs. This divergence between price and momentum offers further evidence of weakness in the current upward price trend.