Wednesday, September 21, 2011

S&P 500 Technical Update (Chart) *Drops to and closes at trading range midpoint*

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Moody's Investor Services downgraded the debt of Bank of America, Wells Fargo, and Citigroup on September 20, 2011


S&P 500 The S&P 500 closed at 1166.76 on Wednesday, September 21, 2011. The S&P 500, SPX, is down -4.05% for the week-to-date, is down -4.28% for September, and is down -7.23% for 2011. SPX is up +72.46% since the March 9, 2009 market cyclical bottom. The SPX closing at 1363.61 on April 29, 2011 was a multi-year closing high and is now -14.44% below that peak.

Extreme Trading Range Since August 4, the S&P 500 has traded in a very wide trading range (see chart below) from an intraday low of 1101.54 on August 9 to an intraday high of 1230.71 on August 31. That is a 129.17 point trading range. SPX right at the midpoint (1166.12) of this trading range on Wednesday, September 21.

Bear and Correction Territory The S&P 500 has been below the level 200-day moving average (1283) since August 2, 2011. The S&P 500 rallied above the mostly level 400-day moving average (1210) on August 29 and September 15 after a failed attempt on August 15. Both rallies above have now also failed. The SPX is now -14.44 % below the peak, multi-year closing high of 1363.61 on April 29, 2011. All of these define a bear and correction market and territory.

Bear Flag A bear flag has developed that continues to be confirmed by the trading through 9-21-11. This continuation pattern, ultimately to the downside, has become ominous. This pattern, when confirmed by a breakdown through the lower channel, sets up a severe test of the August 8 and 10 closings of 1119-1120 and the August 9 intraday low of 1102

Volatility VIX closed on Wednesday, September 21, 2011 at a higher 36.96, up +19.57% for the week-to-date. VIX is now above the level 20-day average and continues above the ascending 50-day average and well above the 100, 200, and 400-day moving averages.

U.S. Dollar The U.S. Dollar Index closed on Wednesday, September 21, 2011 at a higher 77.64, up +0.71% for the week-to-date. There has been a significant rally the past 3+ weeks. The U.S. Dollar Index had previously been flat, quiet, up a mere +0.22% from July 22 through August 31. The USDX continues above the 20, 50, 100, and 200-day averages. The USDX, since September 8, has rallied and closed above a trading range that began in mid-March 2011. Overall, the rally is the result of a crash in the Euro, which has tested the 400-day moving average since September 9, 2011.

S&P 500 Macro View The SPX closed today at the midpoint of the recent trading range, after rallying above 1200, the Fibonacci 23.6% retracement, and the 400-day moving average. SPX is now below all 3 of these indicators. The negative USA and Global fiscal, economic, and political uncertainties have once again stifled any rally above. A test of the ultimate support at a deep bottom closing of 1119-1121 on August 8 and 10, respectively, appears inevitable. 1200 continues as the benchmark for the sentiment boundary between some optimism and significant uncertainties. SPX is now below the mostly level 20-day and 400-day moving averages, below the sharply descending 50-day average (1220), and well below the 100 and 200-day averages. In reviewing various ultra-long, multi-year indicators, the S&P 500 is below these at the lower end of the aforementioned trading range and above at the higher end. Therefore, SPX continues at the cusp, the dividing line, of an ultimate bear or bull market, but the evidence is accumulating for a downside test to 1100 and even potentially to 1000.
* The SPX has yet to sustain a rally above the 400-day moving average of 1210, which was initially dropped below on August 4. The S&P 500 now has 3 failed rallies above.
* The SPX has yet rally and close above the 300-day average of 1236, which was initially dropped below on August 4. On August 31, the intraday peak since the August 4 crash, SPX pinned 1230.71 and the 300-day average was 1230.18 on that day.
* SPX has not been able to sustain a rally above the Fibonacci 23.6% retracement slightly above 1200, which was initially dropped below on August 4. The Fibonacci range utilized is from the 3-9-09 market cyclical closing low of 676.53 up through the 4-29-11 multi-year closing high of 1363.61.

Economic and Market News Information about the USA and Global economies plus the USA financial system are posted at Boom Doom EconomyFinancial ControlsBaidu Planet, and Neo Solomon.


S&P 500 Daily Chart Below is the SPX daily chart from April 29, 2011 and the multi-year closing high of 1363.61, to illustrate the decline and recent trading range.

Noteworthy Closing Prices
Current Close: 1166.76
2011 High: April 29 1363.61
2011 Low: August 8 1119.46
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

S&P 500 Chart Review
Intermediate Term Trend: descending 25d avg less than descending 50d avg since 8-9-11; SPX is below both, bearish
Long Term Trend: SPX less than descending 10 month ema = 1249 beginning WE 8-5-11, bearish
Key Resistance: 20d avg 1188, benchmark 1200, Fibonacci 23.6% retracement 1200+, 50d avg 1220, recent peak closes 1216, 1219, trading range high 1231
Key Support: at support, trading range midpoint 1166, trading range lows 1121-1119 and 1102-1101
Moving Averages: now above 20d, 400d avgs, just below 50d, far below 100d, 200d avgs
Uptrend Line: below since 7-27-11; line from 3-9-09 cyclical closing low of 676.53 up thru the 7-2-10 closing low of 1022.58
Downtrend Line: below since of 7-8-11, had been below since 4-29-11, line from 10-9-07 all-time closing high of 1565.15 down thru the 4-29-11 multi-year closing high of 1363.61
RSI 14 day = 39.25 is reasonable, near oversold, descending
RSI 28 day = 49.40 is reasonable, descending
MACD (12,26,9) = +3.55, descending, multi-year low 8-10-11 (-19.97); multi-year high 8-31-11 (+11.42)


Conclusion SPX at 1166 is the trading range midpoint of 1166. The consolidation and stabilization continues as the SPX has dropped via Euro weakening and a downward correction. The trading range top is now far above. The downside risk remains high as the bear flag has been confirmed and is in play. In addition, the U.S. Dollar has rallied strongly to the upside out of a trading range lasting from mid-March 2011 on Euro weakness. News-driven corrections downwards and oversold bounces upwards should continue to occur as the consolidation continues. The intermediate-term trend indicator continues bearish. The long-term trend indicator continues bearish. At the present level of the S&P 500, we continue bearish for September, expecting an eventual test of the trading range bottom, continue neutral to slightly bearish intermediate-term (6 months), and continue bullish long-term (12 months).

Disclosure & Portfolio We have no position in SPX, SPY, or any other related ETF as of this posting. We will so note such positions at the time of a weekly posting, but not any short-term trades, such as intraday or intraweek trades, between the weekly postings.


The S&P 500 has been widely regarded as the best single gauge of the large cap U.S. equities market since the index was first published in 1957. The index includes 500 leading companies in leading industries of the U.S. economy, capturing 75% coverage of U.S. equities, it is also an ideal proxy for the total market. S&P 500 is maintained by the S&P Index Committee, a team of Standard & Poor’s economists and index analysts, who meet on a regular basis. The goal of the Index Committee is to ensure that the S&P 500 remains a leading indicator of U.S. equities, reflecting the risk and return characteristics of the broader large cap universe on an on-going basis. The Index Committee also monitors constituent liquidity to ensure efficient portfolio trading while keeping index turnover to a minimum.

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