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S&P 500 Trend Analysis - 10/28/2011

|Includes: SPDR S&P 500 Trust ETF (SPY)
It was an up week for the major markets. For the week, the Dow Jones Industrial Average gained 422.32 points or 3.58%, while the NASDAQ Composite gained 99.69 points or 3.78%.

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).

S&P 500 long-term trend
Technical Stock Market Timing System

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.