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S&P 500 Overview
S&P 500 The S&P 500 dipped this past week closing at 1283.35 on Friday, January 21, 2011. The S&P 500 streak of weekly gains stopped at 7 consecutive weeks, although there have been gains 17 of the last 21 weeks. The S&P 500, SPX, was down -0.76% and +9.89 for the week and is up +2.04% and +25.71 for the month and year. SPX is up +89.70% and +606.82 since the March 9, 2009 market bottom. SPX is -0.90% and -11.67 below the multi-year closing high of 1295.02 set on Tuesday, January 18, 2011. The S&P 500 continues below the multi-year closing high of 1300.68 set on August 28, 2008. This next highest close is 1305.31 on August 11, 2008 which was the peak of the rally. These 2 closings, approximately 1300 and 1305, are the next higher hurdles for the S&P 500. Beyond that is all the way back to June 25, 2008 and a close of 1321.97.
2010 for the Record The S&P 500 finished 2010 up +12.78% and +142.54 points plus gained the last 5 consecutive weeks of 2010 and was up 15 of the last 18 weeks in 2010. SPX finished December up +6.53%, after barely down in November -0.23%, after gains in October (+3.69%) and September (+8.76%), a loss in August (-4.74%), and a gain in July (+6.88%).
Volatility The VIX closed Friday, January 21, 2011 at a higher 18.47 , the highest close since November 30, 2010. VIX put in a double bottom and multi-year lows of 15.45 on Wednesday, December 22, 2010 and 15.46 on December 14, 2010. Those were the lowest closings of 2010 and the lowest closings since July 19, 2007 (15.23). The VIX is now above both the 20 day simple moving average (17.15) and the 50d sma (18.20) for the first time since November 30, 2010. VIX continues below the 100d and 200d sma's. The 100d sma crossed below the 200d - a Death Cross - on November 11, 2010. No additional Death Crosses appear imminent. VIX was up +19.47% for the week, finished December down an incredible -24.60%, finished 2010 down -18.13%, and is down -62.82% since the March 9, 2009 stock market bottom. The VIX is down -59.66% from the 2010 closing high of 45.79 on May 20. The VIX put in a triple bottom in mid-April 2010 with a 2010 YTD closing low of 15.58 on April 12.
The Big Question What happens now? Up, Down, Sideways?
Current The S&P 500 at 1283.35 pulled back this past week but remains at lofty heights. SPX closed near the double close of 1282.83 and 1282.83 in 2008 on September 1 and August 28, respectively. This takes the index back to late August 2008 and specifically to the next benchmark hurdle, and resistance, of 1300.68 on August 28, 2008. Looking back, the S&P is climbing up the back side of the rally that peaked on August 11, 2008 at 1305.31. In retrospect, from that peak, the S&P was overall downhill going forward until the cyclical low of 676.53 on March 9, 2009. That was 607 points and 683 days ago.
Background The S&P 500 has arrived, back to the beginning of the pre-Great Recession prices, slowly continuing upwards through the 1) July 2008 correction, August 2008 rally, and September 2008 plunge, 2) the beginning and end of the April 2006 rally peak, 3) the February 2001 plunge, and 4) the early 1999 consolidation. Has the recovery of the USA and Global economies proceeded far enough to justify a pre-Great Recession price in the SPX? If yes, the SPX is on the way to 1300 and upwards into the 1300s. If no, the SPX is approaching strong resistance at 1300 - 1305 and will most likely stall at awaiting stronger economic data and corporate earnings to justify a pre-Great Recession valuation.
History July 2008 was really the end of the Good Old Days: commodities, including oil, peaked, the Great Credit Bubble was about to totally burst, word was out the banks were in big trouble, and the Great Recession would soon arrive in full force. The rally in August 2008 was a last glimmer of hope before the world and markets realized how bad it really was. Lehman Brothers declared bankruptcy on September 15, 2008 and the Great Financial Crisis, among other crises, began. The S&P 500 trading ranges for those months were:
May 2008: 1373 - 1440 with a close of 1400
June 2008: 1272 - 1404 with a close of 1280
July 2008: 1200 - 1292 with a close of 1267
August 2008: 1247 - 1313 with a close of 1283
September 2008: 1106 - 1303 with a close of 1166
As can be seen, the current SPX of 1283.35 is in the August/September rally range and is attempting to enter the higher, June 2008 price range. SPX is at the August 2008 close and September 2008 opening.
Economy Overall, the USA & Global economic data for October, November, and December has been very encouraging, with the exception of the Reuters/University of Michigan consumer sentiment dropping in early January, attributable to rising gasoline prices, and The Conference Board consumer confidence dipping in late December. Gallup reports economic confidence improved in early January, but is at about the same level as a year ago (January 2010). The December monthly data, a Monthly Economic Review, is here [ We predict the December data, to be reported in January, will be also and be the best post-Great Recession month to-date. The ongoing EU sovereign debt crisis may continue to be a drag on USA equities but will not hold the S&P 500 down ultimately.
The Future We have pulled out the Magic 8 Ball to divine what lies ahead for the S&P 500. The bulls , aka greed and optimism, are currently trumping the bears, aka fear and pessimism, in the equity markets even with the pullback this past week. The seeming vagaries of the short-term market appear to be in profit-taking mode and consolidation. We continue predicting the SPX has an upside bias to 1300 - 1305, which is the peak of the August 2008 rally. SPX continues just below at 1283.35. The arrival at the 1300 - 1305 level may well prove to be strong resistance, generate profit taking, and a short-term, possibly intermediate-term, pullback. However, we now believe the SPX has an upside bias to 1321, when the 1300 - 1305 resistance is eventually rallied through. Q4 2010 corporate earnings, Q4 USA economic growth, and Q4 global economic growth should exceed Q3 2010 and propel the S&P 500 to at least 1300 - 1305, if not higher. We now estimate the USA GDP for Q4 2010 will be approximately +3.35% QoQ minimum. However, we are mildly concerned that the Q1 2011 data may indicate that at least the USA economic recovery, if not the global economic recovery, has slowed, not stalled, from Q4 2010. This would halt the additional momentum necessary for the SPX to continue upwards through the 1300s to 1400 and onwards to the peak of the May 2008 rally (a very distant 1426.63 closing on May 19, 2008).
606.82 points in 683 days since the March 9, 2009 cyclical low of 676.53!
S&P 500 Weekly Chart Below is the SPX weekly chart from from January 2008 to the current close of 1283.35 on January 21, 2011. A monthly chart is included lower on this page for an even longer-term perspective.
Noteworthy Closing Prices
Current Close: 1283.35
2011 High: January 18 1295.02
2011 Low: January 10 1269.75
2010 High: December 29 1259.78
2010 Low: July 2 1022.58
YE December 31, 2010: 1257.64
YE December 31, 2009: 1115.10
Market Cyclical Low: March 9, 2009: 676.53
* The weekly chart is shown this week and does not include the 20, 25, 50, 100, and 200 day simple moving averages discussed in the commentary below *
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 continues bullish. Both sma's are ascending.
Resistance The S&P 500 is just below the January 18 peak, multi-year closing high of 1295.02, which is current resistance. Current intraday resistance is 1296.06 on January 18. Higher resistance is 1300, then 1305, which are both a psychological barrier and the closings on August 28 and 11, 2008, respectively. Higher, long-term resistance is 1321.97, the close on June 25, 2008. (These prices are based on Google Finance historical prices, which are slightly different than Yahoo Finance historical prices).
Support Current significant short-term support is 1270 from the January 3 and 10 dips. The 20 day simple moving average of 1272.99 is also significant support and was tested on January 20 with an intraday pin through and a successful bounce upwards. Further below is support at the 50 day simple moving average of 1238.85. There are multiple levels of support below.
Moving Averages SPX is above all significant simple moving averages: the 20, 25, 50, 100, and 200 day. All are ascending. Each is above any longer term average and are spread out in a bullish fan.
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 January 18, 2011 multi-year closing high of 1295.02. SPX has created a new downtrend line with this current multi-year closing high.
Relative Strength Index (RSI) The RSI 14 day = 66.78 is reasonable, leaning overbought, ascending, below the recent peak of 79.35 on January 18, and well above the recent low of 35.43 (oversold) on November 26. The multi-year abysmal low was 10.40 on July 6, 2010. The 2010 peak was 99.30 on on March 17. The RSI 28 day = 68.67 is reasonable, leaning overbought, ascending, and below the recent peak of 81.31 on January 18. The 2010 low was 34.09 on May 25 at 34.09. The 2010 peak was 84.25 on April 5. SPX has now dropped to reasonable RSI levels.
MACD (12,26,9) The MACD = -1.19 is the lowest since December 1 (-2.19), although has been hovering around the 0.00 line recently. MACD plunged to -11.44 on May 7, 2010, the lowest reading since the October 2008 financial panic. MACD peaked at +8.43 on June 18, 2010, the highest since the rally off the bottom in March 2009.
Long-Term Trend The 10 month exponential moving average of 1170.24 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 above this signal. SPX initially dropped below this signal in late May, 2010 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 has continued above since.
Conclusion We maintain there is an upside bias for the S&P 500 to 1300 - 1305, which is the peak of the August 2008 rally and a psychological price. The intermediate term trend continues bullish and the long term trend continues bullish. Ongoing overall positive USA and Global economic news continues to sustain the long-term rally and even stronger economic data is expected in January (for mostly December data). Q4 earnings season financial results have been encouraging and have provided additional momentum upwards. The Financial Post has a summary of the 2010 stock market stories, Climbing a Wall of Worry, which seems an appropriate description for 2010. Even with all the negativity and dire predictions, the S&P 500 has risen above.
S&P 500 Monthly Chart
USA failed and problem banks
Federal Reserve statistical releases
JPMorgan Chase & Co. (JPM) financial performance charts
Citigroup (C) financial performance charts
Goldman Sachs (GS) financial performance charts
Wells Fargo (WFC) financial performance charts
Bank of America (BAC) financial performance charts
Morgan Stanley (MS) financial performance charts
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