Checkmate (by TnRevolution)

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Checkmate.

That moment between when an anticipated opportunity crosses the line to an inevitable outcome.  The moment before the ship actually sinks….between when everyone knows the ship is taking on water, to realizing the ship is actually going to sink.  Panic ensues from the moment of realization until the moment when the entire ship is sunken.  The moment before a car crash, when you actually come to the realization that you have lost control of the car, and will crash.  Today could very well be that day.

I posted two of the below charts earlier today in the comments section, as well as on SocialTrade.  Why is today important?  First let's look at an hourly chart of the SPX.  This morning's high at the open made a near perfect touch of the 61.8% Fib retracement from the September high to the November low.  Also, you will notice that coming off the November low, SPX has formed a very nice rising wedge.  A break of this rising wedge to the downside could have very bearish consequences for a few reasons. 


#1 – SPX will have formed a lower high in relation to the September high, setting the stage for a downtrend to continue.

#2 – SPX and RUT will have backtested their larger 2 year rising wedge patterns, setting the stage for a potential large scale decline.

#3 – RUT and other indices are falling away after a backtest of their broken daily MACD trendlines, setting the stage for continued IT weakness.

SPX12312

On the daily SPX chart, you can clearly see the wedge that has been formed over the past couple weeks.

SPX12312II

Another indicator of this outcome is the VIX.  Over the past 2 weeks as SPX has made a serious of short term higher highs, the VIX has not followed suit by making a series of lower lows.  On the contrary, the VIX put in a decent short term double bottom, and has begun to move higher accompanied by a nice MACD positive divergence.

VIX12312

The chess pieces are in position.  If the short term wedge breaks to the downside…..  I call Checkmate.

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