Saturday, November 12, 2011

S&P 500 Continues Below 200-Day Average (Chart) *Slightly up +0.85% for week*

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USA Consumer Credit is not really expanding; Federal Government and Sallie Mae lending is only reason for increase


S&P 500 The S&P 500 closed at 1263.85 on Friday, November 11, 2011. The S&P 500, SPX, was up +0.85% for the week, is up +0.84% in November, up +11.70% this quarter, is up +0.49% for 2011, and is up +86.81% 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 -7.32% 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 closed well above the midpoint of this trading range on Friday, November 11.

S&P 500 Rallies Out Of Correction Territory The S&P 500 continues below the slightly descending 200-day moving average (1272), continues above the ascending 300-day moving average (1250), continues above leveling 100-day moving average of (1228), and continues above the slightly ascending 400-day moving average (1214). The SPX is now -7.32% 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: 1263.85
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 slightly ascending 10 month ema = 1248 beginning WE 10-28-11, bullish
Key Resistance: 200d avg 1272, 1287, 1300 benchmark, 1305
Key Support: 1260, 1254, 300d avg 1250, 20d avg 1244, 100d avg 1228
Moving Averages: below 200d, above 20d, 50d, 100d, 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 = 51.59 is reasonable, ascending
RSI 28 day = 63.00 is reasonable, descending
MACD (12,26,9) = -1.88, ascending, multi-year lo 8-10-11 (-19.97); multi-year hi 8-31-11 (+11.42)


Conclusion SPX at 1264 slightly gained back some prior week losses this past week, but it was a volatile week of ongoing EU Sovereign Debt Crisis uncertainties. The 200-day average (1272) continues to be tested and is current, key resistance. On we go: European assurances regarding the EU Sovereign Debt Crisis rally global markets, then surprises and disappointments drop the markets. As noted last week, once there is a temporary fiscal fix for Greece, the worries will focus on Italy and the volatility will most likely continue. Investor sentiment has shifted to the upside as there has not been terribly negative USA or Global economic data. The bottom appears to be in for the S&P 500 in 2011 and the question is now: what is the top? A short-term consolidation and stabilization from the October 27 & 28 rally peak is in progress, which is beginning to look more as a continuation pattern to the upside. Ongoing negative USA and Global fiscal, economic, and political uncertainties will hold the market back somewhat, but a general uptrend should continue as the USA and Global economic data is indicating some growth. 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 above, which signifies even more optimism, stronger economic recovery, and is ultimate resistance. Therefore the current trading range is 1200 -1300. A test of 1300 will most likely occur in November, certainly by year-end.
● Pre-Crash Close 1287 SPX continues below the August 1 pre-crash close of 1286.94. Previously SPX pinned through intraday on October 27. An eventual upside breakout sets up a test of the 1300 - 1305 area, the next major sentiment benchmark.
● 200-Day Average SPX has not been able to sustain a rally above the 200-day average of 1272.27, after first breaking through on October 27 and 28 and testing November 8 and 9.
● Pre-Crash Close 1260 SPX has once again rallied above the August 3 pre-crash close of 1260.34, which has acted as both resistance and support. 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.
● 300-Day Average SPX continues above, but testing, the ascending 300-day average of 1250.37, after first breaking through on October 24 and testing since.

S&P 500 Outlook The intermediate-term trend indicator continues bullish. The long-term trend indicator continues bullish. At the present level of the S&P 500, we continue moderately bullish for November and December, and continue bullish long-term (2012).

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. Some USA economic indicators have been very encouraging: decreasing weekly unemployment claims, an advance estimate Q3 GDP of +2.5%, a rebound in consumer sentiment, and post-recession highs in personal income and consumer spending. The October "jobs report" was neutral with an unemployment rate of 9.0%, a jobs gains of +80,000 will probably be revised upward, and the prior months jobs gains were in fact revised upwards. For now, the USA economic bottom appears to be in and an upwards growth trend, albeit slow to very slow, is emerging intermediate-term.

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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