Trend: Mixed Momentum: Mixed Sentiment: Mixed Daily Trading Range: High 35.90 (3.2%)
Daily Simple Moving Average Lines: Blue (20 SMA) Green (50 SMA) Orange (100 SMA) Red (200 SMA)
S&P 500 4-Hour Chart
Technical Wave: Testing both support and resistance in equal measure in a mid-term sideways chop that is moving around the Dec 2010 and Dec 2011 closing price points. The 200-day SMA area will be important through Earnings Season, as will the 50-day SMA support area just above the 1225 swing point.
Overlapping and volatile price action is struggling to find fair value each day, outside of knee-jerk reactions to breaking headline news or regional markets opening and closing. The latest equity moves in response to central bank interventions and economic outlooks have pushed prices back and forth around December 1998 ES valuations.
Buy Support: Bullish traders will be looking to potentially buy the short reversals to 1225 (the 38% Fibonacci retracement of the move higher from 1145 to 1285), which could then target 1255 and 1275.
Sell Resistance: Bearish traders will be looking to potentially sell any moves that fail to break the 1285 area (the price point created after the move higher from 1145), which could then target 1275 and possibly 1225 if financial outlooks decline into 2012.
Overall: It is surreal that the S&P 500 can be flat after 13 years of trade, and yet move 1.5% in five minutes most days and maintain a daily trading range of 3%. Equity investors have witnessed a tumultuous period of trade that stretches back to mid-1997 that has not seen any sustainable growth. Buy-and-Hold has died, and the future of equity trade seems to be in Buy-and-Sell, and will remain that way for as long as electronic headline news-reading algorithms control intra-day price action.
Investors withdrew over $140B this year from equity funds, eclipsing previous records, according to ICI data. Retail is not buying into the volatility created by ever-reducing market participation levels. If US 10-year Treasury note values break and hold above 132.50 the chances for an equity rally diminish substantially.
This Week: Accept that news-headline related moves are dominating technical potential, and that the already high average daily trading range is likely to continue moving higher, creating further volatility. In 16 weeks the S&P 500 made 16 moves up and down that averaged close to 10%, on the back of a daily trading range of 3%. Danger signals are flashing, with most initial break-outs being quickly returned to their starting point.
Information, analysis and methodologies provided are for informational purposes only, obtained from sources believed to be reliable, and should not be used as a replacement for research by an individual investor or licensed investment professional. In no event should the content of this correspondence be construed as an express or implied promise, guarantee, or implication that profits or losses can be made or limited in any manner whatsoever. No guarantee of any kind is implied or possible where projections of future conditions are attempted.