Saturday, September 11, 2010

S&P 500 Regains 100 Day Moving Average (Charts)

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Bulls and Bears Have Basically Tied, the S&P 500 is Down -0.50% for 2010

Markets Overview

S&P 500 The S&P 500 closed basically flat for the week at 1109.55 on Friday, September 10, 2010. The S&P 500, SPX, is up +0.46% for the week, up +5.74% for the month, down -0.50% for the year, and up +64.01% since the March 9, 2009 market bottom. In addition, SPX is down -8.85% from the April 23, 2010 YTD closing high of 1217.28. The SPX has basically traded sideways since late May, is still within this trading range, and has a downside bias.

Death Crosses The S&P 500 has now has closed below the 200 day moving average since August 11; that's 22 consecutive trading days. The 50 day simple moving average descended below the 100 day sma on June 23 - a Death Cross - and then descended below the 200 day sma on July 2 - another Death Cross. The 100d sma descended below the 200d sma on August 24 signalling yet another Death Cross. Although lagging indicators, this shows the price weakness of the SPX since the April 23 YTD peak.

Major USA Equity Indexes The equity indexes were mixed this week with the Russell 2000 down -1.07%, the NASDAQ 100 up +1.18% (powered by Apple), and the Dow Jones Industrial Average, S&P 500, and NASDAQ Composite basically flat. The Russell 2000, NASDAQ Composite, NASDAQ 100, S&P 500, and Dow Jones Industrial Average 30 have all fallen well below the 2010 YTD highs. The bullish trends are broken. For comparative purposes, the current price status, intermediate-term and long-term trends, dates generated, and the percentage below the 2010 YTD high are:
S&P 500 Below 200d sma; Above 50d, 100d sma; Bear 9-10-10; Bull September 2010, -8.85%
Russell 2000 Below 100d, 200d sma; Above 50d sma; Bear 9-1-10, Bull September 2010, -14.21%
NASDAQ Composite Below 100d, 200d sma; Above 50d sma; Bear 9-7-10; Bull September 2010, -11.37%
NASDAQ 100 Above 50d, 100d, 200d sma; Bear 9-10-10; Bull September 2010, -7.93%
Dow Jones Industrial Average 30 Above 50d, 100d, 200d sma; Bull 7-30.10; Bull September 2010, -6.62%
The DJIA is -6.62% below the YTD closing high while the Russell 2000 is -14.21%, which indicates big cap stocks have been performing better - or at least holding their value better - than small and mid cap stocks. The DJIA has regained the 50, 100, and 200 day simple moving averages while the Russell 2000 is still below  the 100d and 200d sma's.

Currencies The Euro, via the Euro/US Dollar price, EURUSD, has rallied above the 2010 YTD low of 1.18971 on June 6, but is down -11.48% for 2010. The US Dollar Index, USDX, has pulled back from the 2010 YTD closing high of 88.51 on June 7, but is still up +6.16% for 2010. The US Dollar/Japanese Yen, USDJPY, set another multi year closing low of 83.37 on September 7, and is down -9.49% for 2010. There has been some disconnect between the Euro, US Dollar, and S&P 500. The Euro had been the tail wagging the dog, that is, the Euro would go down, then the US Dollar Index goes up, and the SPX goes down - or all of this vice versa. However, now the uncertainty over the viability of the USA economic recovery and mixed USA economic data has become a variable. The three key currencies affecting the markets right now:
US Dollar Index Below 100d sma, Above 50d, 200d sma; Bear 7-13-10, Bull September 2010
Euro/US Dollar Below 50d, 200d sma; Above 100d sma; Bear 9-1-10; Bear December 2009
US Dollar/Japanese Yen Below 50d, 100d, 200d sma; Bear 5-20-10; Bear May 2010

Economic and Market News (Links at Bottom of this Page) The USA Q2 GDP was revised downward by the BEA to 1.6% and the trend has been downward since the peak in Q4 2009. The FOMC also lowered their Q3 and beyond USA GDP projections. The ECRI Weekly Leading Index appears to be bottom bouncing, after peaking in April and plunging, but did hit a 4-week high the week ending September 3. However, Lakshman Archuthan of ECRI states the WLI and Annualized Growth Rate (-10.1%) indicate ""No re-acceleration of growth on the horizon", as the WLI and AGR are projecting forward up to 6 months. The Conference Board monthly Leading Economic Index appears to be topping out, but the August index has not been released yet. Whether the USA GDP, WLI, and LEI have bottomed, will begin recovery, or continue downwards represents the "unusually uncertain" economic outlook that FRB Chair Bernanke has stated. The USA unemployment rate edged up to 9.6% in August and and weekly unemployment claims continue above 450,000.

In addition, FRB Chair Bernanke has also stated the pace of economic recovery has slowed somewhat.  The latest Fed Beige Book was mixed, some districts reporting a moderate increase in economic activity while others were flat or slowing down. The IMF issued a partial update of their semi-annual World Economic Outlook as of June 30 and noted the global recovery continues, but some GDP estimates were subdued. A second half 2010 economic slow down in growth is in progress for the world and the USA.

Volatility The VIX closed Friday, September 10 at 21.99, near the recent lows. The VIX put in a triple bottom in mid-April with the 2010 YTD closing low of 15.58 on April 12. The VIX topped out at a YTD closing high of 45.79 on May 20. VIX is up +3.19% for the week, down -15.99% for the month, up +1.43% for the year, and down -55.74% since the March 9, 2009 market bottom. In addition, the VIX is down -51.98% from the 2010 YTD closing high of 45.79 on May 20. This is about when the SPX sideways, range-bound trading began.

The Big Question What happens now? Up, Down, Sideways? Even though USA equities have rallied recently, I still maintain the short-term, and probably intermediate-term, outlook for the S&P 500 is ongoing sideways trading with a downside bias. The economic recovery in the USA and world has slowed, but has not stalled. A look at the trading range is below in the SPX daily chart commentary.

S&P 500 Regains 100 Day Moving Average

S&P 500 Daily Chart Below is the SPX daily chart since the Flash Crash on May 6, 2010, to illustrate the trading range the SPX has been in since about May 20. A monthly chart is included at the bottom of this page for a broader perspective.

Noteworthy Closing Prices on Daily Chart Below
Current Close 1109.55
2010 YTD High 4-23-10 1217.28
2010 YTD Low 7-2-10 1022.58
YE 12-31-09 1115.10
10 Month EMA 1083.89

Trading Range The S&P broke down to begin a trading range on May 18. The highest intraday price subsequently has been 1131.23 on June 21 (the highest yellow horizontal line on the daily chart below). The lowest intraday price since has been 1010.91 on July 1 (the lowest yellow horizontal line on the daily chart below). Based on these parameters, the SPX is now reaching the higher end of the trading range at 1109.55. Tremendous support was shown in the upper 1040s during August 24-31 before the market rallied above and this area could be argued as the "new bottom" of the trading range. This would be key support the next time tested.

Intermediate-Term Trend The intermediate-term signal, the comparison of the 25 day and 50 day simple moving averages, signaled a bear market for the SPX on Friday, September  10. That is, the 50d sma is greater than the 25d sma. An intermediate-term bull market had previously been in effect since August 5.

Resistance Because the SPX is well below the YTD highs, there are multiple levels of resistance above. The question is whether the SPX can hold above the regained 50 day and 100 day simple moving averages plus the 1100 area. The 200 day simple moving average (1115.63) has proven to be resistance and the SPX has been below for 22 consecutive trading days. SPX broke down through the 200d sma on May 20, 2010 and sideways trading has ensued. The next significant price is the August 9 closing peak of 1127.79. Regaining this key price would be considered an upside breakout.

Support Because the SPX is above the YTD lows, there are multiple levels of support below. The recently regained (September 9) descending 100 day simple moving average (1102.23) is nearby, key support. The regained (September 2) ascending 50d sma (1085.51) is also benchmark support. The recent closing lows in the 1040s are now important support. The 2010 YTD closing low was set on July 2 at 1022.58 is absolutely critical support. The previous 2010 YTD closing lows of 1050.47 and 1056.74 on June 7 and February 8, respectively, are key support. Both of these prices are key benchmarks and psychological prices for support.

Moving Averages SPX had plunged through the 25d, 50d, 100d, and 200d simple moving averages in August, is now above the 25d, 50d, and 100d sma's, and below the 200d sma. The 25d sma is descending and below the 50d, 100d, and 200d sma's. The 50d sma is now ascending but crossed below the 100d sma on June 23, a Death Cross, and below the 200d sma on July 2, another Death Cross. The 100d sma continues descending and crossed below the 200d sma on August 24, a Death Cross. The 200d sma is leveling. SPX dropping continuing below the 100d and 200d sma's with no definitive breakout above (yet) the 200d is bearish.

Uptrend Line The yellow uptrend line, a rate of price ascent, is from the March 9, 2009 closing low of 676.53 up through the current 2010 YTD closing low of 1022.53 set on July 2. SPX began testing this uptrend line on August 24, rallied above on September 1, and now has stayed above for 7 consecutive trading days.

Higher Downtrend Line The (much) higher yellow downtrend line, a measure of the rate of price descent, is from the October 9, 2007 all-time closing high of 1565.15 down through the April 23, 2010 YTD closing high of 1217.28. SPX has remained well below this downtrend line since.

Lower Downtrend Line The lower yellow downtrend line, a measure of the rate of price descent, is from the April 23, 2010 YTD closing high of 1217.28 down through the recent August 9 closing high of 1127.79. The 100d sma is also trending downwards along this trendline. SPX rallied above this trendline on September 9.

Relative Strength Index (RSI) The RSI 14 day = 62.59 is reasonable and well above the July 6 YTD and multi-year abysmal low of 10.40. The RSI 28 day = 46.87 is leaning oversold and above the May 25 YTD low of 34.09. The RSI's are off the lows and allow upside potential although an short-term oversold dip is now possible based on the 14d RSI.

MACD (12,26,9) The MACD switched to bullish on September 2, after being bearish since August 11. MACD continues up trending since August 26. MACD had plunged to -11.44 on May 7, the lowest reading since the October 2008 panic. MACD peaked at +8.43 on June 18, 2010 at the highest since the rally off the bottom in March 2009.

Long-Term Trend The 10 month exponential moving average of 1083.89 is a long-term trend indicator and shown on the monthly chart below. That is the line in the sand, so to speak, for the long term signal of a bear market. SPX is now above this signal. SPX initially dropped below this signal in late May, indicating long-term bear market had arrived and has regained and lost the indicator several times which indicates uncertainty and lack of trend.

Conclusion Uncertainty over the continuation of the USA economic recovery, or at least the rate of recovery, and previously the Euro Crisis have caused the markets to break the bull market trend that began in March 2009 and peaked in April 2010. The intermediate term trend is tenuously neutral to bearish and the long term trend is neutral to leaning bullish. Overall, the short-term trend, and probably the intermediate-term trend, appears to be ongoing sideways, range-bound trading with a downside bias. The technical indicators such as resistance, support, trendlines, RSIs, and MACD have been pushed to extremes since the April 23 YTD peak close of 1217.28. The moving averages continue bearish as lagging indicators.

S&P 500 Monthly Chart

Below is the SPX monthly chart since January 2005. The overall analysis and commentary are the same as for the daily chart above. The higher and lower yellow horizontal lines are the current trading range discussed above. The yellow downtrend and uptrend lines are the same, and as described, on the daily chart above. The white moving average line is the 10 month exponential moving average, which is the long-term bull or bear market signal, as discussed above with the daily chart. SPX is currently just above the 10m ema which signals a long-term bear market.

Related Articles and Links
USA Weekly Leading Index Rises to 4-Week High (Charts) *Annualized Growth Rate -10.1%* Boom Doom Economy
USA Weekly Unemployment Claims Down -27,000 (Charts) *Total Claims 451,000* Boom Doom Economy
USA Unemployment Rate Edges Up To 9.6% In August (Charts) Boom Doom Economy
USA Monthly Leading Economic Index: Double Dip Recession or Bottom Bouncing? (Chart) Boom Doom Economy
USA Q2 GDP Revised Downward to 1.6% (Chart) Boom Doom Economy
IMF Update: Global Recovery Continues (Chart) Boom Doom Economy
Fed Beige Book: USA Economic Growth at Modest Pace (Review) Financial Controls
Fed Chair Bernanke: Pace of Economic Recovery Has Slowed Somewhat (Review) Financial Controls
Fed Chair Bernanke: Moderate Recovery, Outlook "Unusually Uncertain" (Review) Financial Controls
FOMC Lowers USA 2010 GDP Projection (Review) Financial Controls

We have no position in SPX or any related ETF.

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