S&P 500 Overview
S&P 500 The S&P 500 rallied this past week to close at 1310.87 on Friday, February 4, 2011. The S&P 500, SPX, was up +2.71% and +34.53 for the week, is up +1.92% for February, was up +2.26% in January, and up +4.23% for 2011. SPX is up +93.76% and +634.34 since the March 9, 2009 market bottom. The SPX closed at 1310.87 on Friday, February 4, 2011 at a multi-year closing high, which was the highest close since the closing of 1321.97 on June 25, 2008. The close also exceeded the closings of 1300.68 on August 28, 2008 and 1305.31 on August 11, 2008. The S&P 500 has gained 18 of the last 23 weeks.
Volatility The VIX closed Friday, February 4, 2011 at a much lower 15.93, the lowest close since January 14, 2011 (15.46). VIX put in a double bottom and multi-year lows of 15.45 on Wednesday, December 22, 2010 and 15.46 on January 14, 2011. Those were the lowest closings of 2010 and the lowest closings since July 19, 2007 (15.23). The VIX is now again below the 20, 50, 100, and 200 day simple moving averages. The 100d sma crossed below the 200d - a Death Cross - on November 11, 2010. The 50d sma (17.74) is descending and approaching the descending 20d sma (17.22).
The Big Question What happens now? Up, Down, Sideways?
Economy Overall, the USA & Global economic data for October, November, December, and January early indicators have overall been very encouraging and surprising. The January monthly data, a Monthly Economic Review, is here [ We now make a bold statement: The economic data appears to show the recovery is over and expansion has begun in both the Global and USA economies. Much of the economic data is now at pre-Great Recession peaks and highs, not post-Great Recession peaks and highs. For example, the USA 2010 GDP (advance estimate) was $14.66 trillion, which is 1) the highest ever and 2) higher than the 2008 peak of $14.37 trillion. The 2009 GDP dipped to $14.12 trillion as the Great Recession was in full force. In addition, there have been 6 consecutive quarters of growth in the USA GDP QoQ and Q4 2010 annualized is $14.87 trillion, approaching $15 trillion. Of course, there is continued uncertainty over the sustainability of the "recovery" but no indication yet that there has been any slowing of economic growth, activity, and output QoQ (Q1 2011 compared to Q4 2010). The USA is not without economic and financial problems, of course, these are noted here [USA & Global Economy: Recovery Continued in January (GDP Charts) *Monthly Economic Review*].
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, have been trumping the bears, aka fear and pessimism, in the equity markets for the past few months. Exclusive of periodic EU sovereign debt crises, Egyptian uprising news, or any other international crisis short of all-out war, the seeming vagaries of the short-term market are mostly profit-taking and consolidation, not a change in the long term, or even intermediate term, upward trend. The ongoing EU sovereign debt crisis, the Egyptian uprising, or other Arab World discontent may continue to be a drag on USA equities periodically, but will not be the deciding factor in what stalls S&P 500 Post-Great Recession Rally. Slower USA and Global economic growth is what can stall the SPX and so far there has been no indication of this.
While a correction and pullback is inevitable, we predicted the SPX had an upside bias to 1300 - 1305, which is the peak of the August 2008 rally. The S&P 500 has arrived at this level and exceeded. We continue to believe the SPX has an upside bias to at least 1322, which is the next highest barrier, the close on June 25, 2008. Further, we now believe ultimately the S&P 500 will reach 1400 if Q1 2011 economic growth data begins showing Q4 2010 has been exceeded. This appears possible. The hurdles ahead are 1343, 1351, and 1360 which are the 2008 closings of June 19, 17, and 16, respectively. After those levels, next are 1362 and 1404, the 2008 closings of June 9 and 5, respectively. There is much resistance ahead and pullbacks, corrections, and consolidations are probable.
Q4 2010 corporate earnings, Q4 USA economic growth, and Q4 global economic growth have exceeded Q3 2010 and has propelled the S&P 500 above the 1300 - 1305 benchmark. We continue to estimate the USA GDP for Q4 2010 at +3.4% QoQ minimum. The BEA advance estimate was +3.2%. 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 1427 closing on May 19, 2008). A Q1 2011 GDP of less than 3% would probably halt the SPX short and intermediate term uptrend.
+634 points in 697 days since the March 9, 2009 cyclical closing low of 676.53!
S&P 500 Weekly Chart Below is the SPX daily chart from from January 3, 2011 to the current close of 1310.87 on February 4, 2011. This shows all applicable price interactions at 1276 and above. A monthly chart is included lower on this page for an even longer-term perspective.
Noteworthy Closing Prices
Current Close: 1310.87
2011 High: February 4 1310.87
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 daily chart does not show the 25, 100, and 200 day simple moving averages nor the uptrend line 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 None of the moving averages are resistance. The only current resistance is the February 4 intraday high of 1311.00. Long term resistance was noted earlier in this post: 1322, 1343, 1350,
Support First key support is the benchmark and psychological price of 1300. The 20 day simple moving average of 1289.47 is support. Next is strong support at 1276. Additional significant short-term support is 1270 from the January 3 and 10 dips and below that more support is at 1259-1260. Further below is support at the 50 day simple moving average of 1259.03. There are multiple levels of support below the current price.
Moving Averages SPX is above all the simple moving averages monitored: 20d, 25d, 50d, 100d, and 200d sma's. All the sma's 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 February 4, 2011 multi-year closing high of 1310.87. Of course, SPX is at this downtrend line just created.
Relative Strength Index (RSI) The RSI 14 day = 58.76 is reasonable, descending, below the recent peak of 88.90 on January 5, 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 = 66.45 is reasonable, mostly level, and below the recent peak of 84.17 on January 10. The 2010 low was 34.09 on May 25. The 2010 peak was 84.25 on April 5. SPX continues at reasonable RSI levels.
MACD (12,26,9) The MACD = +0.31 is ascending and positive after being negative 12 consecutive trading days. 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 1196.22 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 a 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 2010 and has continued above since.
Conclusion The SPX has reached and exceeded the 1300-1305 benchmark and psychological price. A correction, pullback, consolidation may occur before additional gains upwards to 1321 and ultimately 1350. We maintain there is an upside bias for the S&P 500 to 1321 and ultimately to 1350 and 1400. The intermediate term trend continues bullish and the long term trend continues bullish. Ongoing overall positive USA and Global economic news plus Q4 2010 corporate earnings continue to sustain the long-term rally.
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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