Wednesday, September 7, 2011

S&P 500 Technical Update (Chart) *SPX rallies to just below 1200 benchmark*

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Fed Beige Book: USA economic activity continued to expand at a modest pace


S&P 500 The S&P 500 closed at 1198.62 on Wednesday, September 7, 2011. The S&P 500, SPX, is up +2.10% for the week to-date, down -1.66% for September, was down -5.68% for August, and is down -4.69% for 2011. SPX is up +77.17% since the March 9, 2009 market bottom close of 676.53. The SPX closing at 1363.61 on April 29, 2011 was a multi-year closing high, the highest close since the closing of 1404.05 on June 5, 2008. SPX is now -12.10% below that multi-year closing. SPX has rallied above the ascending 20-day average (1176) and is just below the slightly ascending 400-day average (1207). However, SPX continues far below the other major moving averages: 50, 100, and 200-day.

Extreme Trading Range Since August 5, 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 Wednesday, August 31. That is a 129.17 point trading range. SPX is now above the mid-point (1166.12) of this trading range.

Bear and Correction Territory The S&P 500 has been below the 200-day moving average since August 2, 2011. Before dropping below, the SPX had been above the 200-day average since September 13, 2010. The 200-day average is considered by some the dividing line between a bull and bear market, therefore the SPX would be considered in a bear market. The S&P 500 is now below the 400-day moving average, which could be considered the ultra long-term dividing line between a bull and bear market. The SPX is now -12.10% below the peak, the multi-year closing high of 1363.61 on Friday, April 29, 2011. Some define a correction market and territory as -10% or more from the market peak, therefore, the SPX would be considered in a correction. The 50-day moving average crossed below the 200-day moving average, a Death Cross, on Friday, August 12. In addition, the 100-day moving average crossed below the 200-day moving average today, Wednesday, September 7, another Death Cross.

Volatility VIX closed at a lower 33.38 on Wednesday, September 7. VIX is down -4.69% for the week to-date. VIX is now below the slightly descending 20-day average and continues above the 50, 100, and 200-day moving averages.

U.S. Dollar The U.S. Dollar Index closed at 75.95 on Wednesday, September 7. The USDX is up +1.31% for the week to-date. The U.S. Dollar Index had previously been flat, quiet, up a mere +0.22% from July 22 through August 31. The USDX has rallied above the 20, 50, 100-day averages and is just below the 200-day moving average (76.43). The USDX is now in the upper quarter of a trading range that began in mid-March 2011.

S&P 500 Macro View The SPX closing at 1199 is at resistance, including the 1200 benchmark price and the Fibonacci retracement of 23.6% (1201). Just above those are the 8-15-11 closing peak of 1204 and the 400-day moving average (1207). Key support below is the ascending 20-day average (1176) and trading range mid-point (1166). Ultimate support was found at a deep bottom closing of 1119-1121 on August 8 and 10, respectively. 1200 continues as the benchmark resistance and the sentiment boundary between some optimism and continued significant uncertainties. 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 is at the cusp, the dividing line, of an ultimate bear or bull market, reflecting the uncertainties of the economic and financial trends and therefore the equity markets.
* The SPX has yet to sustain a rally above the 400-day moving average of 1207, which was initially dropped below on August 4.. The S&P 500 rallied above in late August, then fell back below. SPX actually closed at the 400-day average on August 15, which appeared to act as resistance.
* The SPX has not been able to regain the 300-day moving average of 1232. SPX pinned through up on Wednesday, August 31, the peak of the recent rally. SPX pinned 1230.71 and the 300-day average was 1230.18 on that day. The S&P 500 has been below this average since August 4.
* The S&P 500 closes of 1119.46 and 1120.76 on August 8 and 10, 2011 were the lowest closings since Friday, September 10, 2010 (1109.55), which interestingly was the last day SPX was below the 200-day average before gapping up on Monday, September 13, 2010. A rally ensued until August 2, 2011, when the SPX definitively dropped below the 200-day average.
* The S&P 500 intraday low of 1101.54 on Tuesday, August 9, 2011 was the lowest price since September 9, 2010, which interestingly was the first day the SPX closed above 100-day average. A rally ensued until March 16, 2011, when the SPX briefly dropped below the 100-day average. This was also the Fibonacci retracement of 38.2%.

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: 1198.62
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 between 25d and 50d avgs, bearish
Long Term Trend: SPX less than descending 10 month ema = 1255 beginning WE 8-5-11, bearish
Key Resistance: 1200 benchmark, 400d avg 1207, recent peak close 1219, trading range high 1231
Key Support: 20-day avg 1176, trading range lows 1121-1119 and 1102-1101
Moving Averages: above 20d avg, below 400d, far below 50d, 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, 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 = 50.82 is reasonable, ascending
RSI 28 day = 42.55 is reasonable, ascending
MACD (12,26,9) = +6.87, ascending, multi-year low 8-10-11 (-19.97); multi-year high 8-31-11 (+11.42)


Conclusion Up and down the S&P 500 goes to nowhere. As noted above, the SPX is at the cusp, the dividing line, of an ultimate bear or bull market, reflecting the uncertainties of the economic and financial trends and therefore the equity markets. These uncertainties are the USA economic growth or lack thereof and the EU sovereign debt and financial system crisis. Until these are known and resolved, respectively, the S&P 500 will continue seemingly trendless but actually in a consolidation. The USA and Global fiscal, economic, and political uncertainties continue plus high frequency trading. Further significant negative news, such as worse USA economic data or another EU sovereign debt crisis bombshell and the S&P 500 will drop deeper into the trading range. Downwards corrections and oversold bounces upwards should continue to occur as the consolidation continues. If a USA double-dip recession does occur, the bottom is not in. 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 to neutral for September, 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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