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S&P 500: Intermediate-Term Bear Market Still Intact
The intermediate-term signal, the comparison of the 25 day & 50 day simple moving averages, still indicates an ongoing bear market for the S&P 500. That is, the 25d sma is less than the 50d sma. This is the first such bear market signal since July 2009, occurring on February 10, and only the second one since the March 2009 bottom. The SPX did regain the 50d sma today, Friday, which is a bullish sign. The recent pullback created price damage that continues to be repaired through sustained higher prices.
The close today of 1109.17 is in upper resistance area from sideways channel trading in Novermber & December 2009. The resistance from the October 2009 highs was overcome this week. Regaining the 1130+ price area after the three huge down days of January 20, 21, & 22, 2010 is next, but could be a tough slog.
The uptrend line in yellow is from the March 9, 2009 closing low of 676.53 up through the January 29, 2010 closing low of 1073.87. The SPX had broken down through this trendline but regained the trendline and held it for 3 days, a bullish price signal. Whether the SPX can continue above this trendline, this rate of price ascent, will determine whether a bull market signal is generated sooner.
The 25d sma continues to descend but the 50d sma has leveled off. The 100d sma has began to ascend. The 200d sma rate of ascent is steady. Most bothersome is the 25d sma descending towards the ascending 100d sma.SPX breaking down through the 50d & 100d sma's and the 25d sma breaking down through the 50d sma. The SPX did regain the 100d sma on Wednesday, February 17 and the 50d sma today, as noted. Overall, some indications of price weakness persist, but bullish signals continue to mitigate and are encouraging.
The lowest horizontal yellow line is the 10 month exponential moving average from the monthly chart, which I have overlayed on this daily chart. That is the line in the sand, so to speak, for the long term signal of a bear market. The SPX is well above this 1050.70 signal with a close today of 1109.17, which is the higher horizontal yellow line.
Conclusion: The SPX has now had a sustained rally off the lows of earlier this month and is now back to the January 22 area. Holding the current price levels and higher prices will eventually sustain a signal that an intermediate-term bull market has returned through ongoing price strength. The intermediate-term trend is still bearish, but there have been encouraging bullish signals. The long-term trend is still bullish.
US Dollar: Intermediate-Term Bull Market Still Intact
The intermediate-term signal, the comparison of the 25 day & 50 day simple moving averages, still indicates an ongoing bull market for the US Dollar. That is, the 25d sma is greater than the 50d sma and has been since mid-December 2009. This is the first such bull market since from early February 2009 through early April 2009. This is also the first bull market since the March 2009 highs and subsequent decline in a bear market.
The close today of 80.59 is a new rally closing high and an upside breakout from the previous intraday highs of the last 2 weeks. The current price is in the upper resistance area of sideways channel trading in May, June, & July 2009. Penetrating through this resistance would be a a major upside breakout.
The 25d sma is ascending steeply, as is the 50d sma, for the first time since February & March 2009. The 100d sma is also ascending, but the 200d sma continues descending.. The 50d sma crossed above the 100d sma on January 22, 2010, signalling price strength. The 50d sma now has crossed above the 200d sma, the Golden Cross, today. Both are bullish signals. The US Dollar regained the benchmark 80 price this week. Overall, these are indications the price strength.
The lowest horizontal yellow line is the 10 month exponential moving average from the monthly chart, which I have overlayed on this daily chart. That is the line in the sand, so to speak, for the long term signal of a bear market. The US Dollar is well above this 78.97 signal with a close today of 80.59, which is the highest horizontal yellow line. The middle yellow horizontal line is the benchmark 80 price.
The very long-term downtrend line, not shown on this chart, from the January 2002 closing high of 120.22, is still significantly above at approximately 83.50+.
Conclusion: The US Dollar has had a remarkable rally from the lows of late November & early December 2009. The intermediate-term trend is still bullish. The long-term trend is still bullish.
Summary
Hmmm, the US Dollar is bullish and breaking upside though resistance, and the S&P 500, SPX, is also rebounding from a pullback. At least for the interim, the inverse correlation of the USD and SPX has been negated. How long can this change in the relationship continue? I think as long as there is downward pressure on the Euro, and perhaps the Yen, the US Dollar can rise along with the SPX. Ultimately, the inverse correlation will reassert but this could be weeks ahead.
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