Friday, November 5, 2010

S&P 500 at Highest Close Since September 2008! (Charts) *Bulls rally 5 straight weeks, 9 of last 10!* SPY SPX

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S&P 500 finishes week at highest close since September 19, 2008!
Bulls up 5 consecutive weeks, 9 of last 10!

S&P 500 Overview

S&P 500 The S&P 500 rallied yet again this week, closing at a 2+ year high of 1225.85 on Friday, November 5, 2010. The S&P 500, SPX, was up +42.59 and +3.60% for the week and for November, is up +9.93% for the year, and is up +81.20% since the March 9, 2009 market bottom. SPX is now above the April 23, 2010 previous YTD closing high of 1217.28 and is at the highest close since the September 19, 2008 close of 1255.08.

Death Cross The 100 day simple moving average has not yet regained the 200d sma, which signalled a Death Cross on August 24. However, with the S&P 500 at a 2+ year high, this appears moot.

Volatility The VIX closed Friday, November 5, 2010 at 18.26, the lowest close since April 26, 2010 at 17.47. The VIX continues below the 25, 50, 100, and 200 day simple moving averages. The 100d sma will soon cross below the 200d - a Death Cross. VIX is down -13.87% for the week and for November (more than the SPX is up), down -15.77% for the year (more than the SPX is up), and down -63.24% since the March 9, 2009 market bottom. The VIX is down -60.12% from the 2010 YTD closing high of 45.79 on May 20. The VIX put in a triple bottom in mid-April with the 2010 YTD closing low of 15.58 on April 12.

The Big Question What happens now? Up, Down, Sideways? The S&P 500 rallied in September, eventually rallied above the summer  trading range, and the September Rally continued into October. In October, the gains diminished: the recent weekly gains of the SPX, in reverse chronological order, were +0.02%, +0.59%, +0.95%, and +1.65%. The last 4 weeks gains have been small and consistently decreasing each week, as if the rally was grinding to a halt. Then this past week the SPX rallied +3.60%! The recent mid-term elections, the Federal Reserve's announcement of quantitative easing, and positive economic data re-ignited the rally this past week. Q3 earnings reports were good enough to provide some upward market momentum, but earnings season is over. Based on the obvious bounce upwards this week and the re-acceleration of the recovery in the USA and global economies in October, there appears to be an upside bias. From a technical view, there is no short-term or intermediate-term resistance, only long-term resistance beginning in September 2008! These aforementioned market drivers pushed the SPX up to test resistance and then exceed the prior YTD high of 1217.28. The economic recovery in the USA and world had slowed during the Summer Slump, but did not stall, and now the manufacturing and services sectors are expanding once again.

Economic and Market News Information about the USA and world economies plus the USA financial system are posted at Boom Doom Economy and Financial Controls.

S&P 500 at Highest Close Since September 2008!

S&P 500 Daily Chart Below is the SPX daily chart from mid-April to illustrate current support from April 2010. The only resistance is long-term beginning in September 2008! A monthly chart is included at the bottom of this page for a long-term perspective.

Noteworthy Closing Prices on Daily Chart Below
Current Close: 1225.85
2010 YTD High, November 5: 1225.85
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 and is now bullish. Both sma's are ascending, and have caught up with the September (+8.8%), October (+3.7%), and November (+3.6%) rally.

Resistance Because the SPX is at a YTD and multi-year high, the only resistance is longer-term beginning in September 2008! The July 11, 2008 and September 5, 2008 weekly closes of  1239.49 and 1242.31, respectively, are noteworthy. However, the benchmark September 19 close of 1255.08 is most likely the key resistance as this was the sub-peak, and futile rally, before the crash during the financial crisis beginning the next week.

Support Because the SPX is at a YTD and multi-year high, there are multiple levels of support below. Nearest benchmark support is the prior YTD high of 1217.28 on April 23 (highest yellow horizontal line on daily chart above). Next support below is the April 15 sub-peak close of 1211.67 (middle yellow horizontal line on the daily chart above) and the April 29 sub-peak close of 1206.78 (lowest yellow horizontal line on the daily chart above). The April 20 and 21 closings of 1207.17 and 1205.94 are also integrated into the April 29 support making the 1205-1207 range strong support. Of course, the 1200 area just below is benchmark and psychological support.

Moving Averages The 25d sma continues ascending, now ascending even more sharply, and is above the 50d, 100d, and 200d sma's. The 50d sma is ascending strongly, regained the 100d on September 22, and regained the 200d sma on October 22. The 100d sma is ascending just above and along the uptrend line, but continues below the 200d sma. The 200d sma remains above the 100d sma and has begun ascending.

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 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 has remained above since.

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 prior YTD closing high of 1217.28. SPX rallied above this trendline on October 5 and has remained above since.

Relative Strength Index (RSI) The RSI 14 day = 73.87 is marginally overbought, descending, and pulled back from recent highs. The multi-year abysmal low was 10.40 on July 6. The 2010 peak was 99.30 on on March 17. The RSI 28 day = 73.18 is marginally overbought, leveled off, and below recent  highs. The 2010 low was 34.09 on May 25 at 34.09. The 2010 peak was 84.25 on April 5. Both RSIs are marginally overbought but reasonable considering the SPX is at a YTD and multi-year high.

MACD (12,26,9) The MACD = +2.22 and ascending after the recent gains. MACD had plunged to -11.44 on May 7, the lowest reading since the October 2008 financial 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 1128.33 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 and November indicating a bull market.

Conclusion The September Rally continued into October and appeared to be sputtering to a halt until  this past week. The S&P 500 closed the week at a YTD and multi-year high. The intermediate term trend is bullish and the long term trend is bullish. Perceived positive economic data pushed SPX above the top of the summer trading range of 1130, then above 1150, initial positive earnings reports pushed SPX onwards to just below 1170, ongoing earnings reports and economic data rallied SPX to above 1170, and then slowly to the low 1180s. The past week of mid-term elections, the Federal Reserve's announcement of quantitative easing, and positive October economic date propelled the SPX to above 1200 and a YTD and multi-year high.

S&P 500 Monthly Chart: Rally at 2+ Year High!

Below a very long-term view of the SPX on a monthly chart since December 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, uptrend line, and downtrend line are the same, and as described, on the daily chart above, as applicable. 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 1225.85 is well above the 10m ema of 1128.33 which signals a long-term bull market.

We have no position in SPX, SPY, or any other related ETF.

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