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Wednesday, June 30, 2010

S&P 500: Another Day, Another 2010 Low (Charts)

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Uncertainy, even Fear, about the Viability of the USA & Global Economic Recovery


S&P 500 Scorecard at June 30
The first half of 2010 is over. 2010 began with uncertainty about the USA economic recovery but data in Q1 was encouraging. As the H1 continued, especially in June, the data deteriorated suggesting a slowdown or even stalling of the recovery. The S&P 500, SPX is down -4.28% for the week, down -5.39% for the month, down -7.57% for the year 2010, up +52.35% since the market bottom on March 9, 2009, and down -15.33% from the 2010 YTD closing high of 1217.28 on April 23.

S&P 500, 1040, Support
Yesterday, June 29, the SPX closed just above 1040. Today, June 30, SPX broke down through 1040 to close at 1030.71 which is a new 2010 YTD closing low. The selloff and breakdwon came in the last hour of trading, which is  a sign of fear. 1040 was critical support and there is a long history of interaction with the 1040 price. As noted yesterday, the next support was about 1030.98, the August 27, 2009 peak.

SPX closed today at this support, which is the late August 2009 peaking formation. Next support below now is the 2009 peaking action of 1012.73, 1010.48, and 1005.65 on August 13, 7, and 4, respectively. However, for the market, 1040 was a benchmark price and the next lower key price is 1000. Interaction with 1,000 previously was from early August 2009 through early September 2009.

Wall of Worry Grows Bigger
A few more negative economic news today: 1) the ADP USA National Employment Report for May was an anemic and immaterial +13,000 jobs increase for nonfarm private employment, 2) the Chicago purchasing managers index fell to 59.1% from 59.7% in May which means manufacturing growth is increasing at a decreasing rate, 3) Moody's placed Spain's AAA credit rating on downgrade watch (Fitch and S&P have already downgraded Spain from AAA), and 4) housing starts in Japan unexpectedly dropped in May -4.6% YoY.

Add to today's news the list from yesterday: The Conference Board issued a correction and downward revision of China's leading economic index for April plus reported a plunge in USA consumer confidence. Japan reported higher unemployment and a slowing of industrial production. The G20 summit over the weekend offered no realistic solutions for the global economy or the huge sovereign debts of the developed countries. The USA leading economic indicators are declining or flat. The USA Q1 GDP was revised downwards to +2.7% and probably 3.0+% is necessary to generate jobs and reduce the unemployment rate. USA housing starts tanked in May and bank lending is still contracting.

Add the European sovereign debt crisis which creates both EU fiscal and financial system crises on top of all these aforementioned concerns plus Greek national strikes plus concerns about a double-dip recession, even talk of a depression, and you have the S&P 500 at a new YTD low of 1030.71. Investor confidence is ranging from uncertainty to fear.

Now the market waits for both the weekly unemployment claims on Thursday and the monthly June employment report on Friday. The market appears to be pricing in the worst case scenario. The USA economic news recently has been a net negative, that is the negative has outweighed the positive. On top of that any negative news from Europe and Asia magnifies the uncertainty and fear in the USA.

S&P 500 Daily Chart
Below is the SPX daily chart since August 2009. The chart includes all recent interaction with 1040 beginning in late August 2009. The chart also includes the next support, noted above, in early and mid August 2009. A monthly chart is included at the bottom of this page for a broader perspective and a complete history of the SPX interaction with 1040.

Noteworthy Closing Prices on Daily Chart below
Current Close 1030.71 (Yellow horizontal line)
2010 YTD High 4-23-10 1217.28
2010 YTD Low 6-30-10 1030.71
YE 12-31-09 1115.10
10 Month EMA 1080.82

S&P 500: Line in the Sand at 1040 Breaks Down


Higher Uptrend Line
The higher yellow uptrend line, a measure of the rate of price ascent, is from the March 9, 2009 closing low of 676.53 up through the February 8, 2010 closing low of 1056.74. The February 8 closing low of 1056.74 was the bottom of the first 2010 pullback, before this current plunge and new 2010 YTD lows. SPX broke through this uptrend line on May 13 and has been below for 34 consecutive trading days. I have left this uptrend line intact to observe when SPX can ultimately regain this previous rate of price ascent.

Lower Uptrend Line
The lower yellow uptrend line, a rate of price ascent, is from the March 9, 2009 closing low of 676.53 up through the previous 2010 YTD closing low of 1050.47 set on June 7. SPX subsequently rallied enough to stay above this trendline for 15 trading days, although SPX almost pinned the trendline on June 25, before breaking down through on June 29.

Downtrend Line
The 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.


S&P 500 Monthly Chart: The History of 1040

Below is the monthly SPX chart showing the history of the 1040 price. The S&P 500 first reached, and surpassed, the 1040 price in February 1998. SPX then dropped below in September 1998 only to regain 1040 in October 1998. It would be September 2001 before SPX dropped below 1040 again, regain, and then finally drop below in June 2002 during the Dot Com Bust. In October 2003 SPX regained 1040 until dropping below again in October 2008 during the financial crisis.

In September, October, November 2009 the SPX tested and finally prevailed again above 1040. Now, on June 30, 2010 the S&P 500 is yet again below 1040. The overall analysis and commentary are the same as for the daily chart above. The yellow horizontal line, the current closing price, plus 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.



Disclosure
We have no position in SPX or any related ETF.


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Tuesday, June 29, 2010

S&P 500: New YTD Low, 1040 Critical Support (Charts)

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Uncertainy, even Fear, about the Viability of the USA & Global Economic Recovery

Overview
The Wall of Worry has become longer and taller. The Conference Board issued a correction and downward revision of China's leading economic index for April plus reported a plunge in USA consumer confidence. Japan reported higher unemployment and a slowing of industrial production. The G20 summit over the weekend offered no realistic solutions for the global economy or the huge sovereign debts of the developed countries. The USA leading economic indicators are declining or flat. The USA Q1 GDP was revised downwards to +2.7% and probably 3.0+% is necessary to generate jobs and reduce the unemployment rate. USA housing starts tanked in May and bank lending is still contracting.

Add the European sovereign debt crisis which creates both EU fiscal and financial system crises on top of all these aforementioned concerns plus Greek national strikes plus concerns about a double-dip recession, even talk of a depression, and you have the S&P 500 at a new YTD low of 1041.24. Investor confidence is ranging from uncertainty to fear.

Now the market waits for both the weekly unemployment claims on Thursday and the monthly June employment report on Friday. The market appears to be pricing in the worst case scenario. The USA economic news recently has been a net negative, that is the negative has outweighed the positive. On top of that any negative news from Europe and Asia magnifies the uncertainty and fear in the USA.

S&P 500 and 1040
The SPX closed on June 29 just above 1040. This is critical support and there is a long history of interaction with this price. Below is support at about 1030.98, the August 27, 2009 peak. But for the market, 1040 is a benchmark price and the next lower key price is 1000. Interaction with 1,000 was from early August 2009 through early September 2009.

S&P 500 Daily Chart
Below is the SPX daily chart since the first recent test of 1040 beginning in late August 2009. A monthly chart is included at the bottom of this page for a broader perspective and a complete history of the SPX interaction with 1040.

Noteworthy Closing Prices on Daily Chart below:
Critical Support 1040.00 (Yellow horizontal line)
Current Close 1041.24
2010 YTD High 4-23-10 1217.28
2010 YTD Low 6-29-10 1041.24
YE 12-31-09 1115.10
10 Month EMA 1082.73


S&P 500: Line in the Sand at 1040


Higher Uptrend Line
The higher yellow uptrend line, a measure of the rate of price ascent, is from the March 9, 2009 closing low of 676.53 up through the February 8, 2010 closing low of 1056.74. The February 8 closing low of 1056.74 was the bottom of the first 2010 pullback, before this current plunge and new 2010 YTD low. SPX broke through this uptrend line on May 13 and has been below for 33 consecutive trading days. I have left this uptrend line intact to observe when SPX can ultimately regain this previous rate of price ascent.

Lower Uptrend Line
The lower yellow uptrend line, a rate of price ascent, is from the March 9, 2009 closing low of 676.53 up through the previous 2010 YTD closing low of 1050.47 set on June 7. SPX subsequently rallied enough to stay above this trendline for 15 trading days, although SPX almost pinned the trendline on June 25, before breaking down through on June 29.

Downtrend Line
The 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.

S&P 500 Monthly Chart: The History of 1040

Below is the monthly SPX chart showing the history of the 1040 price. The S&P 500 first reached, and surpassed, the 1040 price in February 1998. SPX then dropped below in September 1998 only to regain 1040 in October 1998. It would be September 2001 before SPX dropped below 1040 again, regain, and then drop below in June 2002 during the Dot Com Bust. In October 2003 SPX regained 1040 until the dropping below again in October 2008 during the financial crisis. In September, October, November 2009 the SPX tested and finally prevailed again above 1040. Now, on June 29, 2010 the S&P 500 is yet again hoverinig just above 1040. The overall analysis and commentary are the same as for the daily chart above. The yellow horizontal line, the 1040 price, plus 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.



Disclosure
We have no position in SPX or any related ETF.


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Sunday, June 27, 2010

S&P 500: Back Below the 200 Day Average, Death Cross Arrives

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New York Stock Exchange


Overview
SPX has been below the 200 day moving average for 4 consecutive days and the 50 day simple moving average descended below the 100 day sma on Wednesday, June 23 - a Death Cross. The S&P 500, SPX, is down -3.65% for the week, down -1.16% for the month, down -3.44% for the year, and up +59.16% since the March 9, 2009 market bottom. In addition, SPX is down -11.54% from the April 23, 2010 YTD closing high of 1217.28. The Euro, via the Euro/US Dollar price, EURUSD, was steady for the week at -0.10%. The US Dollar Index, USDX, has pulled back from the 2010 YTD high of 88.51 at the Monday, June 7 close to 85.28.

The Euro holding steady at least should keep the SPX somewhat steady. Some disappointing USA economic data, such as the May durable goods orders, continued high weekly jobless claims, dismal housing starts in May, and the May jobs report, perpetuates the uncertainty as to the viability of the USA economic recovery. On top of this add the EU Crisis and suspicion about the fairness of the markets (Flash Crash May 6). These factors have created a bearish combination. The Euro had been the tail wagging the dog, that is, the Euro goes down then the US Dollar Index goes up and the SPX goes down or all of this vice versa. Howevere, now the uncertainty over the USA economic recovery has become a variable. Suspiciion, uncertainty, and sudden onsets of fear permeate the equity markets.

Economic and Market News
A review and weekly update of USA and World market and economic news and fundamental analysis is here. Sentiment is "cautiously optimistic" about the global recovery. Asia-Pacific is the most robust economic region while there is uncertainty about Europe's sovereign debt, financial system, and economic recovery. USA leading economic indicators are signalling the recovery is slowing down, perhaps even stalling. USA unemployment and underemployment remains high, bank lending continues to contract, housing starts have plunged, durable goods orders are down, and the Q1 GDP was unexpectedly revised downwards. Yet USA manufacturing shows surprising strength and sustainability.

The Big Question What happens now? Up, Down, Sideways?
We have several major market issues and variables. Overall, I continue to foresee more sideways trading and possible high volatility, with a downside bias until some of this market turmoil settles down. By market turmoil, I mean the EU Crisis primarily and now uncertainty about the strength, even the viability of the USA economic recovery secondarily. Only then will the bottom, and therefore support, be in. Commentary on the major market issues are here. Volatility has been high since the VIX put in a bottom in mid-April. The VIX topped out at a YTD closing high of 45.79 on May 20. VIX is now at a calmer 28.53, but this is still up +19% for the week. However, hopefully this signals no huge SPX drops, barring more bad news out of Europe or dismal USA economic data.

Major USA Equity Indexes
The Russell 2000, NASDAQ Composite, NASDAQ 100, S&P 500, and Dow Jones Industrial Average 30 have all fallen 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 off the 2010 YTD high are:
S&P 500 Below 200d sma; Bear 5-20-10; Bear June 2010, -11.54%
Russell 2000 Above 100d sma; Bear 5-26-10, Bull July 2009, -13.05%
NASDAQ Composite Below 200d sma; Bear 5-21-10; Bull May 2009, -12.12%
NASDAQ 100 Above 200d sma (barely); Bear 5-21-10; Bull April 2009, -10.55%
Dow Jones Industrial Average Below 200d sma; Bear 5-20.10; Bear June 2010, -9.47%
Currencies The two key currencies affecting the markets right now:
US Dollar Index Below 25d sma; Bull 12-21-09, Bull January 2010
Euro/US Dollar Above 25d sma; Bear 12-15-09; Bear December 2009

S&P 500: Back Below 200 Day SMA, a Death Cross Arrives

S&P 500 Daily Chart Below is the SPX daily chart for 2010. A monthly chart is included at the bottom of this page for a broader perspective.

Noteworthy Closing Prices on Daily Chart below:
Current Close 1076.76 (Yellow horizontal line)
2010 YTD High 4-23-10 1217.28
2010 YTD Low 6-7-10 1050.47
YE 12-31-09 1115.10
10 Month EMA 1089.19


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 Thursday, May 20. That is, the 50d sma is greater than the 25d sma. An intermediate-term bull market had previously been in effect since March 16.

Resistance The current close, the yellow horizontal line, has pulled back dramatically since the April 23 YTD closing high. There are multiple levels of resistance above. The 200 day simple moving average has proven to be resistance and the SPX has been below for 4 consecutive trading days. This was after staying above for 5 days, and previously below for 17 consecutive trading days. The 1100 area, a benchmark and milestone price is resistance. The now distant 1150 area is the next significant benchmark resistance. There was a struggle at 1150, and failure to break above, in January 2010. The 1200 area, a benchmark and milestone price, is significant, and still far away, resistance. SPX is now just above the September 2009 peaking action.

Support There are multiple levels of support below. The 200d sma had been support that failed. The 2010 YTD closing low was set on June 7 at 1050.47 is absolutely critical support. The new YTD closing low on June 7 broke through the previous YTD closing low of 1056.74 on February 8. Both of these prices are key benchmarks and psychological prices for support.

Moving Averages SPX has recently plunged through the 25d, 50d, 100d, and 200d simple moving averages and remains below. The 25d sma continues to descend and is below the 50d, 100d, and 200d sma's. The 50d sma is plunging and crossed below the 100d sma on June 23, a Death Cross. The 50d is now descending towards the 200d. The 100d sma has leveled off.and the the 200d sma is beginning to ascend. SPX dropping below the 200d is disappointing. The 200d sma was last tested in early July 2009, a rally ensued.

Higher Uptrend Line The higher yellow uptrend line, a measure of the rate of price ascent, is from the March 9, 2009 closing low of 676.53 up through the February 8, 2010 closing low of 1056.74. The February 8 closing low of 1056.74 was the bottom of the first 2010 pullback, before this current plunge and new 2010 YTD low. SPX broke through this uptrend line on May 13 and has been below for 31 consecutive trading days. I have left this uptrend line intact to observe when SPX can ultimately regain this previous rate of price ascent.

Lower Uptrend Line The lower yellow uptrend line, a rate of price ascent, is from the March 9, 2009 closing low of 676.53 up through the new 2010 YTD closing low of 1050.47 set on June 7. SPX subsequently rallied enough to stay above this trendline for the last 14 trading days, although SPX almost pinned the trendline on June 25..

Downtrend Line The 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.

Relative Strength Index (RSI)
RSI 14 day = 59.98 is reasonable and well above the recent May 7 low of 28.96
RSI 28 day = 42.20 is leaning oversold and above the May 25 YTD low of 34.09
The RSI 14 day is reasonable while the 28 day is leaning oversold, indicating plenty of upside potential.

MACD (12,26,9) The MACD switched to bullish on June 10, but is now downtrending. MACD had plunged to -11.44 on May 7, the lowest reading since the October 2008 panic! MACD had been flipping back and forth around the 0.00 (neutral) line, indicating the uncertainty in the markets. MACD peaked on June 18 at the highest since the rally off the bottom in March 2009!

Long-Term Trend The 10 month exponential moving average of 1089.19 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 below this signal, after briefly regaining the 10m ema last week. SPX initially dropped below this signal in late May, indicating long-term bear market has arrived.

Conclusion Uncertainty over the continuation of the USA economic recovery and the Euro Crisis has caused the markets to remain in turmoil with a downside bias. The intermediate term trend continues bearish and the long term trend is now signalling bearish. The technical indicators such as resistance, support, trendlines, RSIs, and MACD had been pushed to extremes in the last weeks as a result of Fear but are now reaching more reasonable levels. The Bears have been in control, but the Bulls continue to have at least a glimmer of hope as the Euro has rallied and remains steady.


S&P 500 Monthly Chart

Below is the monthly SPX chart since January 2005. The overall analysis and commentary are the same as for the daily chart above. The yellow horizontal line, the current price, plus 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.



Disclosure
We have no position in SPX or any related ETF.


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Monday, June 21, 2010

S&P 500 Still Testing 200 Day Average (Chart)

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SPX closed at 1113.20 today, just above the 200 day simple moving average of 1110.77. This was after gapping up at the opening to an intraday high of 1131.23, presumably on the news that China was the yuan currency peg. The Yuan Rally thereupon fizzled throughout the day.

By the last hour of trading SPX pinned downwards through the 200d sma to 1108.24, but did manage to rally above by the close. The 200d sma has become critical support, after previously being resistance. SPX has pinned downwards through the 200d sma three out of the last four trading days, but managed to close above for five consecutive days now. Hopefully this 200d sma support is not tenuous.

Below is the recent SPX price interaction with the 200d sma, beginning with the Flash Crash on May 6. The 200d sma is the green line. The current close is the yellow horizontal line. Before the Flash Crash, the last time the SPX had been near the 200d sma was on July 13, 2009. SPX broke out above and a strong rally ensued through early August.

As can be seen on the daily chart below, SPX is still above the 25d sma, but below the 100d sma. The early gap up this morning did not quite reach the 100d sma, which is now at 1133.44. The 50d sma is just above the 100d sma at 1137.53.



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Sunday, June 20, 2010

S&P 500: Holds Above 200 Day Average!

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New York Stock Exchange


Overview
The S&P 500, SPX, is up +2.37% for the week, up +2.58% for the month, now up +0.22% for the year, and up +65.18% since the March 9, 2009 market bottom. In  addition, SPX is down -8.22% from the April 23, 2010 YTD closing high of 1217.28.  The Euro, via the Euro/US Dollar price, EURUSD, rallied again this week to a surprising Friday, June 18 close of 1.23862. This has resulted in the US Dollar Index, USDX, pulling back from the 2010 YTD high of 88.51 at the Monday, June 7 close.  The bulls have bounced back and the rally may likely continue if no further sovereign debt crisis news comes out of Europe, which would kill the Euro rally and push the SPX downwards again.

The Euro rally is bullish for the SPX. Some disappointing USA economic data, such as the May jobs report,  perpetuates the uncertainty as to the viability of the USA economic recovery. On top of this add the EU Crisis and suspicion about the fairness of the markets (Flash Crash May 6).  These factors have created a bearish combination. Lately the Euro has been the tail wagging the dog, that is, the Euro goes down then the US Dollar Index goes up and the SPX goes down or all of this vice versa.  As a result, technical and fundamental analysis has been difficult as one crisis news release out of Europe is immediately reacted upon by the equity markets. Suspicion, uncertainty, and sudden onsets of fear permeate the equity markets.

Economic and Market News
A review and weekly update of USA and World market and economic news and fundamental analysis is in the previous post. Overall, the USA and global economic data remains cautiously optimistic and fears about Europe have eased some.

The Big Question What happens now? Up, Down, Sideways?
We have several major market issues and variables.  Overall, I continue to foresee more sideways trading and high volatility, with a downside bias until some of this market turmoil settles down.  By market turmoil, I mean the EU Crisis primarily and now uncertainty about the strength, even the viability of the USA economic recovery secondarily.  Only then will the bottom, and therefore support, be in. Commentary on the major market issues are in the previous post. Volatility has been high since the VIX put in a bottom in mid-April. The VIX topped out at a YTD closing high of 45.79 on May 20.  VIX is now at a much, much calmer 23.95, which is well below the recent extremes, and hopefully signals no huge SPX drops, barring more bad news out of Europe.

Major USA Equity Indexes The Russell 2000, NASDAQ Composite, NASDAQ 100, S&P 500, and Dow Jones Industrial Average 30 have all fallen below the 2010 YTD highs, of course.  The bullish trends are broken.  For comparative purposes, the current price status, intermediate-term and long-term trends, date generated, and the percentage off the 2010 YTD high are:
S&P 500 Above 200d sma; Bear 5-20-10; bull June 2010, -8.20%
Russell 2000 Above 100d sma (barely); Bear 5-26-10, Bull July 2009, -10.11%
NASDAQ Composite Above 200d sma; Bear 5-21-10; Bull May 2009, -8.71%
NASDAQ 100 Above 100d sma; Bear 5-21-10; Bull April 2009, -6.90%
Dow Jones Industrial Average Above 200d sma; Bear 5-20.10; Bull June 2010, -6.73%

Currencies The two key currencies affecting the markets right now:
US Dollar Index Below 25d sma; Bull 12-21-09, Bull January 2010
Euro/US Dollar Above 25d sma; Bear 12-15-09; Bear December 2009


S&P 500: Holding Above the 200 Day Average!

S&P 500 Daily Chart Below is the SPX daily chart for 2010.  A monthly chart is included at the bottom of this page for a broader perspective.

Noteworthy Closing Prices on Daily Chart below:
Current Close 1117.51 (Yellow horizontal line)
2010 YTD High 4-23-10 1217.28
YE 12-31-09 1115.10
10 Month EMA 1096.60


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 Thursday, May 20.  That is, the 50d sma is greater than the 25d sma. An intermediate-term bull market had previously been in effect since March 16.

Resistance The current close, the yellow horizontal line, has pulled back dramatically since the April 23 YTD closing high.  There are multiple levels of resistance above.  The 200 day simple moving average had proven to be resistance, but SPX regained on June 15 and has stayed above for four consecutive trading days. This was after staying below for seventeen consecutive trading days.  The 1100 area, a benchmark and milestone price has also been regained on June 15. The 1150 area is the next significant benchmark resistance. There was a struggle at 1150, and failure to break above, in January 2010. The 1200 area, a benchmark and milestone price, is significant, and still far away, resistance. SPX has risen above the October 2009 peaks and sideways trading range of November and December 2009.

Support There are multiple levels of support below. The 200d sma is now the most closely watched support, currently at 1110.18. Buyers have stepped in and support has been found after the 2010 YTD closing low was set on June 7 at 1050.47, which indicates that both 1000 and 1050 are strong support. The new YTD closing low on June 7 broke through the previous YTD closing low of 1056.74 on February 8. Both of these prices are key benchmarks and psychological prices for support.

Moving Averages SPX has recently plunged through the 25d, 50d, 100d, and 200d simple moving averages, but now has regained the 25d and 200d sma's. The 25d sma continues to plunge sharply and is below the 50d, 100d, and 200d sma's.  The 50d sma decreasing but has so far remained above the 100d and 200d sma's.  The 100d sma has leveled off.and the the 200d sma is beginning to ascend. Regaining the 200d is encouraging. The 200d sma was last tested in early July 2009, a rally ensued.

Higher Uptrend Line The higher yellow uptrend line, a measure of the rate of price ascent, is from the March 9, 2009 closing low of 676.53 up through the February 8, 2010 closing low of 1056.74. The February 8 closing low of 1056.74 was the bottom of the first 2010 pullback, before this current plunge and new 2010 YTD low. SPX broke through this uptrend line on May 13 and has been below for 26 consecutive trading days.  I have left this uptrend line intact to observe when SPX can ultimately regain this previous rate of price ascent.

Lower Uptrend Line The lower yellow uptrend line, a rate of price ascent, is from the March 9, 2009 closing low of 676.53 up through the new 2010 YTD closing low of 1050.47 set on June 7. SPX subsequently rallied enough to stay above this trendline for the last 9 trading days.

Downtrend Line The 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.

Relative Strength Index (RSI)
RSI 14 day = 57.47 is reasonable and well above the recent May 7 low of 28.96
RSI 28 day = 44.67 is leaning oversold and above the May 25 YTD low of 34.09
The RSI 14 day is reasonable while the 28 day is leaning oversold, indicating plenty of upside potential.

MACD (12,26,9) The MACD switched to bullish on June 10 and has uptrended sharply. MACD had plunged to -11.44 on May 7, the lowest reading since the October 2008 panic!  MACD had been flipping back and forth around the 0.00 (neutral) line, indicating the uncertainty in the markets. MACD is now at the highest since the rally off the bottom in March 2009!

Long-Term Trend The 10 month exponential moving average of 1096.60 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 has now regained this signal and can hopefully continue above. SPX dropped below this signal in late May, indicating long-term bear market has arrived. If SPX can hold above the 10m ema, this would continue to signal a bull market has begun and is sustained.

Conclusion Uncertainty over the continuation of  the USA economic recovery and the Euro Crisis has caused the markets to remain in turmoil with a downside bias.  The intermediate term trend continues bearish but the long term trend is now signalling bullish.  The technical indicators such as resistance, support, trendlines, RSIs, and MACD had been pushed to extremes as a result of Fear but are now reaching more reasonable levels.  The Bears have been in control, but the Bulls at least now have a glimmer of hope as the Euro has rallied.


S&P 500 Monthly Chart

Below is the monthly SPX chart since January 2005.  The overall analysis and commentary are the same as for the daily chart above. The overall analysis and commentary are the same as for the daily chart above. The yellow horizontal line, the current price, plus 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.



Disclosure We have no position in SPX or any related ETF.


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Economic & Market News: Fears About Europe Ease Some (Weekly Update)

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Economic & Market News: Fears About Europe Ease Some




























Overview Sentiment is "cautiously optimistic" about the global recovery. Asia is the most robust economic region and Europe is the weak link.















Europe Sovereign Debt Crisis Fear eased some this week as concerns about Spanish sovereign debt and the Spanish banking system were not as intense. Spain sold bonds and the auction was successful. The Euro has rallied and the EUR/USD closed the week on June 18 at 1.23862, after a bottom on June 6 of 1.18971.  The daily and weekly rise and fall of the Euro has been an indicator of the uncertainty, and at times fear, in the global markets and financial system regarding the viability of Greece, Spain, the EU, and ultimately the Euro.











The EU is to release bank stress tests results of the major European banks in late July, to disclose the state of the EU financial system. However, sovereign debt exposure of the banks to the EU countries of concern is reportedly not going to be revealed. We'll see - I think the pressure will be intense to disclose this information and it will probably be reported.











Positive news has kept the crisis from being total gloom. The EuroZone industrial output surged in April per a report June 14. Moody's reported June 11 that Europe's major banks can absorb sovereign debt losses from Greece, Portugal, Ireland, and Spain.. Legitimate stress tests will prove that one way or another. The IMF and EU have so far kept pressing Greece, Spain, Portugal, Ireland, and Italy (the PIIGS) to implement strict fiscal austerity plans.









First Greece overspends, then the EU, ECB, and IMF bail the Greeks out, then fear of contagion to Portugal, Ireland, Spain, perhaps Italy and even UK increases.  Spain has been downgraded by Fitch from AAA to AA and on May 28 the French Budget Minister said France could not ultimately maintain their AAA credit  rating.  First Greece was downgraded and crisis ensued, then Spain was downgraded - next Portugal and Ireland, then later Italy?  The value and viability of the Euro itself continues as suspect, along the EU banking system and overall EU financial and economic system.  Until the world is convinced the EU can hold together and remain viable, market fear and volatility will continue and the USA equity markets are in limbo with little hope of regaining the 2010 YTD highs.









The more the IMF intervenes to bailout the EU, the more the USA does, since the USA contributes billions to the IMF.  USA taxpayers to the rescue!  The EU appears to have solved the liquidity crisis, but whether the solvency crisis can be ultimately be resolved is in doubt.  Hence, the viability of the EU is in question.  Nouriel Roubini summed up the Euro Crisis here.  The Euro rallied this week, which is positive for USA stock markets. The four largest economies in the EuroZone are Germany, France, Italy, and Spain.









USA Leading Economic Indicators (LEI) The Economic Cycle Research Institute reported their Weekly Leading Index fell yet again on June 18 and a 6 week downtrend has now occurred.  Lakshman Achuthan of ECRI  says no persistent downtrend and therefore no double dip recession yet.  Previously, The Conference Board reported the USA Leading Economic Index bounced back to +0.4% (preliminary) in May. This is encouraging data and maintains the uptrend. The LEI monthly increases (revised) in 2010 have been April 0.0%, +1.4% in March, +0.4% in February, and +0.6% in January. Since the equity markets are also considered leading indicators, this data is bullish for USA equities.









USA Economic Trends USA economic data has been overall positive with dips (such as the recent Philadelphia Fed economic report and USA weekly unemployment claims) along the way - "cautiously optimistic".  The problem is the data is not all going in the same way to indicate anywhere near a robust recovery. Freight traffic (sea, air, rail, truck) continues to grow. The June 9 Fed Beige Book reported was "economic activity continues to improve". Also on June 9, Fed Chair Bernanke stated to Congress "the recovery in economic activity...has continued at a moderate pace".  "Moderate" is the current theme of the Fed & Bernanke: moderate growth, moderate pace, etc.  University of Michigan USA consumer sentiment for May was the highest in 2.5 years, yet USA May retail sales decreased for first time in 8 months.  China exports continue to show strong growth. How significant the ultimate impact of the BP Gulf Oil Spill will have regionally and nationwide remains to be seen, but obviously it is negative.









USA Unemployment (Jobs!) The weekly unemployment claims are not indicating a robust or even major economic recovery, even though a lagging indicator. The BLS May Employment Situation report was disappointing and has had a bearish effect on equity markets.  Even though the unemployment rate decreased to 9.7% from 9.9% and total jobs increased +431,000, the private sector generated only +41,000 jobs while the public sector increased by +390,000.  In April, the private sector created +218,000 jobs.  Obviously, we all can't work for the government and it's the private sector job growth that will create a viable USA economic recovery.  The May U-6 unemployment rate (Table A-15, seasonally adjusted) was 16.6%, down from 17.1% in April.  In addition, the Gallup Poll reported underemployment in May at 19.1%, compared to 18.9% in April, which was also disappointing.  However, The Conference Board's Employment Trends Index increased in May for the ninth consecutive month, is up +9% YoY, and "jobs will likely expand further in the next several months".





























































World Economic Trends


































Economic data has been overall positive for most of the World, especially Asia. Europe is now the weak link in the global recovery but the Euro Area might eke out some GDP growth for 2010 per the ECB.  China and Asian exports continue to show strong growth.  Japan has raised their economic assessment, but still cautious. However, OECD composite leading indicators have slowed down indicating continued but slower global growth.  The semi-annual IMF World Economic Outlook (April 2010) is reviewed here.



























USA Financial Regulatory Reform Meanwhile, back in the USA, the political battle continues to reform the financial system, which creates uncertainty first within the financials sector  and then within the markets.  Some more information on this is posted here.  After any financial reform is passed by Congress, this should eliminate the uncertainty for at least the rules of the road, and then the related financial system impact can be determined. If Congress waters down the final reform bill, then the financial system is truly rigged and the greatest bank robbery in the history of the world will continue, paid for in the past, now, and in the future by the American taxpayers.
































USA GDP The BEA "Second Estimate" for Q1 2010 was +3.0% and Q4 2009 was +5.6%.  Economist Peter Morici has some comments about GDP and the BLS May jobs report here, "Halting Recovery Keeps Unemployment High".  Morici states that the USA needs about +3.0% GDP growth to "pull down unemployment" and that recently actual GDP growth has been +2.0%.












USA Sovereign Debt Of note the week of May 31 was the funded federal debt exceeding $13 trillion!  Even more incredible is the USA GDP is approximately $14.5 trillion.  So funded federal debt is rapidly approaching the total of the entire American economy.  The debt totals can be seen at USDebtClock.org.  There will be a Day of Reckoning as Congress cannot stop spending, be they Republicans or Democrats. Federal spending has taken on a life of its own as Congress sends  home the pork and spends on programs that are politically advantageous.










When the Day of Reckoning  will be, I do not know: 1 year? 5 years? 10 years?  The Peter G. Peterson Foundation has the best information on this national disgrace here.  David M. Walker, the former Comptroller General of the United States, is the CEO of the Foundation and has been warning about this impending disaster for years.  On June 10, Mr. Walker stated, “We’re worse than Ireland. We’re two years away from being Portugal and 10 years ago from being Greece.” Former Fed Chair Alan Greenspan warned on June 17 the USA may soon reach the borrowing limit and a "tectonic shift" in fiscal policy is required.









There is also the same sovereign debt risk concerns for USA states, cities, and smaller government entities. Illinois and California are the of most concern for default risk, but many states struggling to balance the budges.









Goldman Sachs & The USA Financial System  The SEC fraud charges, and more claims under investigation, against GS also bring into question the fairness, validity, and viability of the USA financial system.  The Europeans are investigating GS and Merrill Lynch of Bank of America, Deutsche Bank, et.al.  There has even been a call for China to investigate Wall Street.  Until the Wall Street Banksters are brought to justice and financial system reform is implemented, the USA financial system is a fraud and corrupt - the USA taxpayers and citizens are being defrauded.  These investigations and charges will drag on indefinitely, probably for years. Markets could be impacted off and on as more Wall Street Banksters are hopefully removed from the financial and market systems.  More financial institutions will be hunted down and an examples made of them. The 3 credit rating agencies, S&P, Moody's, and Fitch also have gamed the system.  So there will be ongoing market reactions, just as with the EU, to contend with while trading.













USA Quarterly Earnings Season was all but forgotten for Q1 and we now await Q2 earnings season.  Quarterly earnings have been very encouraging, especially in the technology, financial, and industrial sectors that I pay special attention to.










USA Flash Crash! The fairness, objectivity, and validity of the entire USA equities markets, and other markets, is under suspicion.  Frankly, I think the entire USA financial and market system is being questioned. The May 6, 2010 Flash Crash amplified and maginified the ongoing USA financial system debacle.  Are we being totally gamed, and controlled, by Wall Street?  Will the USA government take control and stop the Wall Street Banksters?  This Dylan Ratigan video sums it up.




























































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