Friday, October 28, 2011

S&P 500 Continues Rally! (Chart, Video) *Optimism propels SPX above 200-day average*

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USA Personal Income and Consumer Spending are at Post-Recession Highs


S&P 500 The S&P 500 closed at 1285.09 on Friday, October 28, 2011. The S&P 500, SPX, was up +3.78% for the week, is up +13.58% in October and the quarter to-date, is up +2.18% for 2011, and is up +89.95% 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 the S&P 500 is now -5.76% below that peak, which means the S&P 500 has rallied out of a correction.

Extreme Trading Range The S&P 500 has traded within a very wide trading range from an intraday low of 1074.77 on October 4 to an intraday high of 1292.66 on October 27. That is a 217.89 point trading range and a midpoint of 1183.71. SPX continues at the top of this trading range on Friday, October 28.

S&P 500 Rallies Out Of Correction Territory The S&P 500 has rallied and closed above the mostly level 200-day moving average (1274), the ascending 300-day moving average (1244), the leveling 100-day moving average of (1231), and the slightly ascending 400-day moving average (1213). The SPX is now -5.76% below the peak, multi-year closing high of 1363.61 set on April 29, 2011. 10% below the peak is considered a correction market and 20% below is considered a bear market, therefore the SPX has rallied out of a correction.


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

Noteworthy Closing Prices
Current Close: 1285.09
2011 High: April 29 1363.61
2011 Low: October 3 1099.23
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
Market Cyclical High: April 29, 2011 1363.61

S&P 500 Chart Review
Intermediate Term Trend: ascending 25d avg ascending 50d avg since 10-26-11; SPX > both, bullish
Long Term Trend: SPX ascending 10 month ema = 1251 beginning WE 10-28-11, bullish
Key Resistance: 1287, 1300 benchmark, 1305
Key Support: 200d avg 1274, 1260, 1257, 300d avg 1244, 100d avg 1231
Moving Averages: above all: 20d, 50d, 100d, 200d, 300d, 400d
Uptrend Line: below since 7-27-11; 3-9-09 closing low of 676.53 up thru 7-2-10 closing low 1022.58 (not shown on chart)
Downtrend Line: below since of 7-8-11, from 10-9-07 closing hi 1565.15 down thru 4-29-11 closing hi 1363.61 (not shown on chart)
RSI 14 day = 69.95 is near overbought, descending
RSI 28 day = 57.49 is reasonable, level
MACD (12,26,9) = +8.93, ascending, multi-year lo 8-10-11 (-19.97); multi-year hi 8-31-11 (+11.42)


Conclusion SPX at 1285 has rallied significantly on positive (and surprising) USA economic data plus more European assurances regarding the EU Sovereign Debt Crisis. Investor sentiment has shifted to the upside as the bulls, buyers are in control. The bottom appear to be in for the S&P 500 in 2011 and the question now is: what is the top?. The consolidation and stabilization from the August crash has concluded and earnings season will soon wind down. Although we expect ongoing negative USA and Global fiscal, economic, and political uncertainties to hold the market back somewhat, a general uptrend should continue. 1200 continues as the lower benchmark for the sentiment boundary between some optimism and significant uncertainties and is most likely bottom support. 1300 is the next sentiment boundary which signifies even more optimism and ongoing economic recovery and is ultimate resistance. A test of 1300 will most likely occur in November.
● Pre-Crash Close 1287 SPX is testing the August 1 pre-crash close of 1286.94 and pinned through intraday on October 27. An upside breakout sets up a test of the 1300 - 1305 area, the next major sentiment benchmark.
● Pre-Crash Close 1260 SPX has rallied and closed above the August 3 pre-crash close of 1260.34 and this places the S&P 500 back to the early August days of debt ceiling political gridlock and the S&P downgrade of the USA from AAA.

S&P 500 Outlook The intermediate-term trend indicator continues bullish. The long-term trend indicator is now bullish. At the present level of the S&P 500, we continue neutral to slightly bullish for October, now are moderately bullish for November and December, and continue bullish long-term (12 months).

Global and USA Economy No recession or strong recovery appears probable, just slow to very slow growth in the developed economies and strong, but slowing, growth in the emerging economies. Warren Buffet is saying the recovery is proceeding and no recession is ahead. Lakshman Achuthan of ECRI says the recovery has been underwhelming and that an American Recession is ahead. A video of Achuthan's interview and prediction of the recession is here. Recent USA economic indicators have been very encouraging: an advance estimate Q3 GDP of +2.5%, a rebound in consumer sentiment, and post-recession highs in personal income and consumer spending. For now, the USA economic bottom appears to be in and an upwards growth trend is emerging.

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.


S&P 500 to Peak at 1,328 by Year-End Ray Barros, CEO of Ray Barros Trading Group, believes the S&P 500 will reach 1,328 by the end of the year. He also charts the Hang Seng Index and Silver.

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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