Matrix Markets: S&P 500 Technical Update (Video, Chart) *Consolidation continues within trading range*

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S&P 500 Technical Update

S&P 500 OVERVIEW

S&P 500 The S&P 500 closed at 1177.60 on Wednesday, August 24, 2011. The S&P 500, SPX, is up +4.81% so far this week, is down -8.87% for August, was down -2.15% for July, and is down -6.36% for 2011. The negative USA plus Global fiscal, economic, and political uncertainties have stopped any rally above 1200. SPX is up +74.06% since the March 9, 2009 market bottom. 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 -13.64% below that multi-year closing. That peak closing of 1363.61 exceeded the June 6, 2008 closing of 1360.68. The current close is now far below the closings of 1300.68 on August 28, 2008 and 1305.31 on August 11, 2008, which was a rally peak, just before the USA financial crisis and market crash. SPX continues far below the major moving averages: 50, 100, and 200-day. The 20-day average of 1194 is plunging towards the SPX.

A Technical Look at the S&P 500 Petra Von Kerssenbrock, analyst for Global Technical and Index Research at Commerzbank, joined CNBC for a technical look at the S&P 500. There were 28 months of "perfect bull market", from 667 to 1371. In early August, there was a drop below support of 1248. SPX is now basically in last summer's range, which lasted about 6 months. There is staggered support at 1045 and 1100. Staggered resistance is 1220 and 1248. Stabilization within these ranges is anticipated for "quite some time" and then either above or below these ranges. That is, a bear or bull market will develop. The first wave down and stabilization has occurred. There is a risk of a second wave down. A breakdown through 1100 and 1045 and "we could see a second wave down which would lead to significantly lower prices". It is too early to tell before the markets will deliver a new signal either way, up or down.

Extreme Trading Range The S&P 500 has traded in a very wide trading range (see chart below) from an intraday low of 1101.54 on Tuesday, August 9 to an intraday high of 1208.47 on Wednesday, August 17. That is a 106.93 point trading range. SPX closed in the upper part of this trading range on Wednesday, August 24.

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 has been below the 400-day moving average since August 4, 2011. The 400-day moving average could be considered the ultra-long dividing line between a bull and bear market. The SPX is now -17.61% 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. In addition, the 50-day moving average crossed below the 200-day moving average, a Death Cross, on Friday, August 12.

Volatility VIX closed Wednesday, August 24, 2011 at a very high 35.90. VIX is up +42.18% for August and is up +102.25% for 2011. The VIX closed at 48.00 on Monday, August 8, 2011, which was the highest close since the week ended March 6, 2009, the week before the market cyclical bottom. The skyrocketing VIX has risen far above the 50, 100, and 200-day moving averages. The sharply rising 20-day average of 34.13 is just below the VIX.

U.S. Dollar The U.S. Dollar Index closed on Wednesday, August 24, 2011 at 74.09, down -0.03% so far this week. The U.S. Dollar Index is flat, at +0.11%, for the past 4+ weeks, since the week ended July 22, 2011. The USDX continues below the 20, 50, 100, and 200-day moving averages. The USDX is now in the lower portion of a trading range that began in mid-March 2011.

Economic and Market News Information about the USA and Global economies plus the USA financial system are posted at Boom Doom Economy, Financial Controls, Baidu Planet, and Neo Solomon.

S&P 500 DAILY CHART

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: 1177.60

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: strongly descending 25d avg less than descending 50d avg since 8-9-11; SPX is far below both 25d and 50d avgs, bearish

Long Term Trend: SPX less than descending 10 month ema = 1260.27 beginning WE 8-5-11, bearish

Key Resistance: 20d avg 1194, 1200 benchmark, major moving avgs are far above

Key Support: 1121-1119, 1102-1101

Moving Averages: just below 20d avg, far below 50d, 100d, 200d avgs

Uptrend Line: below since 7-28-11; 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 = 47.24 is reasonable, ascending

RSI 28 day = 38.76 is oversold, slightly ascending
MACD (12,26,9) = +0.75, ascending, positive first time since 7-26-11, multi-year low 8-10-11 (-19.97); multi-year high 7-7-11 (+9.45)

Conclusion The S&P 500 volatility, though lessened this week, continues due to the accumulation of a variety of USA and Global uncertainties of a fiscal, economic, and political nature plus computer flash trading. SPX is in the upper half of the recent trading range (see chart above). An oversold upwards bounce has occurred this week. Further significant negative news, such as worse USA economic data or another EU sovereign debt crisis bombshell, and the lower trading range support will fail. Support is 1121-1119 and any closings below this or further tests of the intraday low of 1102-1101 would be a severe test. Oversold bounces should continue to occur and a consolidation is most likely beginning to develop. 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. We continue bearish for August, 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..

ABOUT THE S&P 500

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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