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Bearish Divergence on S&P Futures

The December E mini S&P futures chart is currently indicating that a decline is likely to happen. As noted on the chart, a bearish divergence was made at the high of Tuesday's trading.

A bearish divergence occurs when price makes a new high as the MACD line makes a lower high.

The same formation was seen on the EUR/USD and AUD/USD charts Nov. 3 when the FOMC officially announced QE2, with gold following on Nov. 9.

Click to enlarge

A decline in S&P futures normally leads to the dollar gaining agains the euro and aussie (among other better-yielders). A true risk-off trade also implies that Treasuries will be bought and as yields decline, the yen will move higher against the dollar.



Disclosure: I have no positions in any stocks mentioned, but may initiate a Long position in SPXU over the next 72 hours.