Saturday, October 9, 2010

S&P 500 Rally Resumes (Charts) *Bulls continue upwards 5 of last 6 weeks*

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Bulls Rally 5 of Last 6 Weeks!

S&P 500 Overview

S&P 500 The S&P 500 rallied yet again this week, closing up +18.91 and +1.65% for the week at 1165.15 on Friday, October 8, 2010. The S&P 500, SPX, is up +23.95 and +2.10% for October, is up +4.49% for the year, and is up +72.22% since the March 9, 2009 market bottom. SPX is down -52.13 and -4.28% from the April 23, 2010 YTD closing high of 1217.28. The SPX is now well above the summer trading range that began on May 18 and was negated on September 17. The S&P 500 has now has closed above the 200 day moving average since Monday, September 13, for 20 consecutive trading days.

Death Crosses and Reversal The 50 day simple moving average descended below the 100 day sma on June 23 - a Death Cross - but regained the 100d sma on Wednesday, September 22. Therefore, this Death Cross has been negated. The 50d sma descended below the 200 day sma on July 2 - another Death Cross which is still in effect. The 100d sma descended below the 200d sma on August 24 signalling yet another Death Cross which is also still in effect. Although lagging indicators, the remaining two Death Crosses, the 50d below the 200d and the 100d below the 200d show the price weakness of the SPX since the April 23 YTD peak.

Volatility The VIX closed Friday, October 8 at 20.71, the lowest close since May 3 (20.19), and continues below the 25, 50, 100, and 200 day simple moving averages. 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 down -8.00% for the week, is down -12.62% for October (more than the SPX is up), is down -4.47% for the year (inversely comparable to SPX), and down -58.31% since the March 9, 2009 market bottom. The VIX is down -54.77% from the 2010 YTD closing high of 45.79 on May 20. This is about when the SPX sideways, range-bound trading began for the summer.

The Big Question What happens now? Up, Down, Sideways? The S&P 500 rallied in September, finally rallied above the summer  trading range, and is now well above this range. Alcoa kicked off earnings season with decent results and forecasting higher global aluminum demand. Intel and AMD launch the technology, semiconductor earnings season on Tuesday and Thursday, respectively. Economic data the past week was mixed, but the negative reports didn't seem to affect the equities markets significantly. With hopefully positive earnings reports coming this month, the bias is now upside driven by earnings. The equities markets may well continue "melting up", barring serious negative economic data. The economic recovery in the USA and world has slowed, but has not stalled.

Economic and Market News Information about the USA and world economies is posted at Boom Doom Economy and Financial Controls.

S&P 500 Rally Resumes

S&P 500 Daily Chart Below is the SPX daily chart since late January 2010 to illustrate current resistance and support. A monthly chart is included at the bottom of this page for a broader perspective.

Noteworthy Closing Prices on Daily Chart Below
Current Close: 1165.15
2010 YTD High, April 23: 1217.28
2010 YTD Low, July 2: 1022.58
YE December 31, 2009: 1115.10

Intermediate-Term Trend The intermediate-term signal, the comparison of the 25 day and 50 day simple moving averages, signaled a bull market for the SPX on Monday, September 27. That is, the 25d sma is greater than the 50d sma. The relationship between these two moving averages is a lagging indicator, is now bullish as both sma's are ascending,  and has caught up the current rally.

Resistance Because the SPX is below the YTD highs, there are multiple levels of resistance above. SPX continues breakouts above current resistance - the latest breakout was above the peak closing of 1150.23 on January 19, 2010 (middle yellow horizontal line on daily chart above). Current resistance above is the sub-peak closing of 1171.67 on May 12 (highest yellow horizontal line on daily chart above). Initial positive earnings reports and perceived net positive economic data pushed SPX above 1150 and onwards to just below 1170. Ultimately the highest peak, and resistance, is the the 2010 YTD closing high of 1217.28..

Support Because the SPX is above the YTD lows, there are multiple levels of support below. Nearest key support is the peak closing of 1150.23 on January 19, 2010 (middle yellow horizontal line on daily chart above). The top of the summer trading range is now support and a milestone: the intraday price of 1131.23 on June 21 and the closing price of 1127.79 on August 9 (lowest yellow horizontal line on daily chart above). The 200 day simple moving average (1119.24) was regained on September 13, and is now support further below.

Moving Averages SPX had plunged through the 25d, 50d, 100d, and 200d simple moving averages in August, but now has regained all. The 25d sma is now ascending steeply, regained the 50d, 100d, and 200d sma's. The 50d sma is now ascending, regained the 100d on September 22, and should regain 200d sma soon. The 100d sma has leveled off, is now slightly ascending, but continues below the 25d, 50d, and 200d sma's. The 200d sma remains above the 50d, and 100d sma's, has leveled off, and has begun slightly ascending. The Death Crosses and a reversal are discussed at the beginning of this post.

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 remained above for 27 consecutive trading days.

Higher Downtrend Line The yellow downtrend line, a measure of the rate of price descent, is a long-term trendline 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 rallied above this trendline on October 5 and has remained above for 4 consecutive trading days, the first time since setting the YTD high on April 23.

Relative Strength Index (RSI) The RSI 14 day = 60.39 is reasonable and well above the July 6 YTD and multi-year abysmal low of 10.40. The peak was on September 20 at 88.58 which was the highest since the 2010 YTD March 17 peak of 99.30. The RSI 28 day = 75.31 is overbought and above the May 25 YTD low of 34.09. The YTD peak was 84.25 on April 5. The RSI 28-day is not at an extreme but is getting a little toppy.

MACD (12,26,9) The MACD = +1.07, bottomed on October 4 at +0.01, and is now remaining above +0.00. MACD switched to bullish on September 2. MACD peaked at 6.51 on September 14 and 15 and has been downtrending. 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 1111.19 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, but then regained and lost the indicator several times, signalling uncertainty and lack of trend during the summer trading range. SPX regained the 10m ema in September and continues above in October indicating a bull market.

Conclusion The September Rally has continued into October as uncertainty over the continuation of the USA economic recovery, or at least the rate of recovery, and previously the Euro Crisis have not slowed down the bulls. The intermediate term trend is bullish and the long term trend is bullish. Perceived net positive economic data pushed SPX above the top of the summer trading range of 1130, then above 1150, and initial positive earnings reports pushed SPX onwards to just below 1170. Ultimately the highest peak, and resistance, is the the 2010 YTD closing high of 1217.28.

S&P 500 Monthly Chart

Below a very long-term view of the SPX on a monthly chart since March 1998. The chart includes all historical price interaction with the current SPX price. The overall analysis and commentary are the same as for the daily chart above. The yellow horizontal lines downtrend line 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 of 1165.15 is currently above the 10m ema of 1111.19 which signals a long-term bull market.

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