The bearish divergence in SPY was caused by an attempt to break above $140.92, the high of the first day of May of this year. This bearish divergence is also present in the S&P 500 index as I wrote yesterday. The probability of a short-term correction in the market before another attempt to break above this resistance level has increased significantly.
The bearish divergence between price, the RSI(14) and my proprietary technical indicator, the MEI(14), is shown in the lower pane, enclosed in a shaded circle. However, indicator lines are not better than lines drawn in the sand. The fundamental forces that move the market arise from value seeking and speculation based on technical analysis is by enlarge a probabilistic game, no different than that of tossing a coin with a small bias towards winning, in the best case. For the majority of technical analysis, the bias a negative because of the lack of underline value seeking. As a result, maintaining consistency using just technical analysis is extremely hard and for the most part, senseless speculation.
Disclosure: no relevant position at the time of this post.