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S&P 500 Trend Analysis - 10/28/2011
The Standard & Poor's 500 Index gained 46.84 points or 3.78%, and closed at 1285.09 on Friday, October 28, 2011. It was a fourth consecutive positive week for the S&P 500 (^GSPC). Weekly volume was 7% above the average. Read More ...
In our previous publication on September 5th we suggested the following:
"Usually when the price moves below 200 day Moving Average, the next up wave at least retests the 200 day MA as a new resistance level. The Bullish rally usually breaks this resistance level and the price moves above the 200 day MA level. S&P 500 index may break the support around 1100 and move down to the next support area around 1000 - 950."
On October 4th S&P 500 index indeed broke the 1100 support level and made a new low at 1074.77. After making a new low, S&P recovered and closed above the support level. On October 4th the first down wave that has started on May 2nd 2011 at 1370.58 has been completed. It had a five wave's structure (See Figure bellow).
The rally that had started on October 4th reached 1292.66 on October 27th. It has broken the 200 day Moving Average (1274.24) and retraced 73% of the previous down wave.
The S&P 500 daily Lane's Stochastic (%D-Slow) is overbought, while the Williams' Percentage Range (W%R) is strongly overbought.
More than 86% of the S&P members have overbought daily Williams' Percentage Range indicator (See details) and 55% are strongly overbought (See details). The Lane's stochastic indicator is overbought for more than 50% of S&P members (See details). During the last week, daily Lane's stochastic main line (%K) has declined below the overbought signal line (%D) for almost 20% of the S&P members (See details). Such crossover is considered a bearish signal.
More than 40% of S&P 500 members have the Downtrend Resistance Alert (See details) and more than 28% have the Downtrend Broken Resistance alert (See details). Dow Jones Industrial Average and NASDAQ Composite indices have the Downtrend Resistance Alert.
During the week, the 16 members of the S&P had Buying Climax signal (See details). A buying climax happens when a stock makes a new 52 week high, but the weekly price closes below the previous week's close. The Buying Climax is often considered an exit signal.
All the above technical indicators suggest that S&P 500 index is near a strong resistance area. The rally may reverse or pause soon.
S&P 500 Trend Analysis - Sep. 5, 2011
The Standard & Poor's 500 Index (^GSPC) closed at 1173.97 on Friday, September 02, 2011. It was trading at the average weekly trading volume. Read More ...
S&P 500 index long-term downtrend is forming a three wave?s structure (See Figure 1). The first wave down (A) had started on October 11, 2007 at 1576.09 and lost 909.30 points, or 57.69%, in 73 weeks and reached 666.79 on March 6, 2009. The second wave (B) gained 703.79 points, or more than 105%, in 26 month and reached 1370.58 on May 2, 2011. Wave B made a lower high; it is a bearish signal. The third wave down (C) is in progress now.
The recent rally had started on August 9th, 2011 at 1101.54 and reached 1,230.71 on August 31st, 2011. It is a sub wave of a long-term C wave and it has a three wave?s structure as well (See Figure 3). Several technical indicators suggest that it was a bearish rally:
- Usually when the price moves below 200 day Moving Average, the next up wave at least retests the 200 day MA as a new resistance level. The Bullish rally usually breaks this resistance level and the price moves above the 200 day MA level. The current rally is weak and it was not even able to reach the 200 day MA.
- Daily Lane's Stochastic %D line is about to crossover with %k line. It is usually considered as a sell signal.
- Sub wave C?s high is only 1.8% higher than sub wave A?s high, while daily Lane's Stochastic has raised substantially and has moved into an overbought area. This divergence is considered as a bearish signal.
- The rally could not reach the Upper Bollinger Band, and this is a bearish indicator.
All the above signals may indicate that the rally might be over, and a new sub wave down has started. S&P 500 index may break the support around 1100 and move down to the next support area around 1000 - 950.Figure 2
S&P 500 Trend Analysis - 3/11/2011
S&P 500 index long-term uptrend had started on March 6, 2009 at 666.79 and reached 1344.07 on February 18, 2011. S&P 500 gained 677.28 points, or more than 101%, in less than two years. Weekly Lane's Stochastic (%D-Slow) is overbought. The chart has formed a three wave?s structure. The third (C) wave is in progress now.
The third (C) wave up has a five wave structure. It has started on July 1st at 1010.91 and gained almost 33% reaching 1344.07 on February 18, 2011. The wave has formed a channel. Price is near the support line. Daily Williams' Percentage Range (W%R) is strong oversold.
During the last week, the price has fallen below the Parabolic SAR (stop and reversal). Price is close to the 50 Day Moving Average. While daily technical indicators are oversold, the 50 Day Moving Average is considered a support level.
On Friday the S&P 500 chart has formed a Bearish Thrusting Candlestick pattern. This pattern occurs in a downtrend and it shows a rally failure in a down market. This is a continuation pattern.
More than 10% of S&P 500 members have an Uptrend Support alert. 74 of S&P 500 index members made a new 52-week high, while almost half of them (36) closed this week below the previous week's close. This event is called a "buying climax".
The S&P 500 members' weekly MACD bearish/bullish divergence ratio is 71/5. It means that 14 times more S&P 500 members have weekly MACD bearish divergence than the bullish divergence. The weekly Lane's stochastic bearish/bullish divergence ratio is 105/2.