Matrix Markets: S&P 500 Technical Update (Chart) *Continues above 100-day average*

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The USA Monthly Leading Index is at a post-recession high

S&P 500 OVERVIEW

S&P 500 The S&P 500 closed at 1242.00 on Wednesday, October 26, 2011. The S&P 500, SPX, is up +0.30% at mid-week, is up +9.77% in October and the quarter to-date, is down -1.24% for 2011, and is up +83.58% 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 -8.92% below that peak, which means the S&P 500 has rallied out of a correction.

Extreme Trading Range Since August 5, the S&P 500 has traded within a very wide trading range from an intraday high of 1256.55 on October 24 to an intraday low of 1074.77 on October 4. That is a 181.78 point trading range and a midpoint of 1165.66. SPX closed essentially at the top of this trading range on Wednesday, October 26.

S&P 500 Rallies Out Of Correction Territory The S&P 500 has been below the slightly descending 200-day moving average (1274) since August 2, 2011. The S&P 500 has rallied up to the slightly ascending 300-day moving average (1243), but initially dropped below on August 4. The SPX is now -8.92% 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.

Dow Jones Transports & Russell 2000 Continue in Correction Market There is a disparity and ongoing divergence among the stock indexes in 2011 performance and how far they are below the 2011 peak closing highs:
Index, YTD Performance, From 2011 Peak Closing High
S&P 500: -1.24%, -8.92%
NASDAQ Composite: -0.08%, -7.76%
Dow Jones 20 Transportation Average: -5.83%, -14.40%
Dow Jones 30 Industrials Average: +2.52%, -7.35%
NASDAQ 100: +5.27%, -3.90%
Russell 2000: -7.21%, -15.96%
The large cap, international companies have reported strong financial results, with strong sales growth in the Asia Pacific region. The energy and technology sector sectors have also reported solid financial performance. The Dow Jones Industrials and NASDAQ 100 are positive YTD. The Dow Jones Transports and Russell 2000 are greater than 10% below their peak 2011 closing highs and continue in a correction market. None of the indexes are in a bear market.

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 peak of 1363.61 to illustrate the rally peak, decline, and recent trading range.

Noteworthy Closing Prices

Current Close: 1242.00

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 < level 10 month ema = 1242.81 beginning WE 8-5-11, tenuously bearish

Key Resistance: 300d avg 1243, trading range hi 1257, pre-crash close 1260
Key Support: 100d avg 1231, Fibonacci 38.2% retracement 1226, 400d avg 1212, benchmark 1200

Moving Averages: at 300d; above 20d, 50d, 100d, 400d; below 200d

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 = 66.60 is reasonable, descending

RSI 28 day = 52.48 is reasonable, slightly ascending

MACD (12,26,9) = +6.36, descending, multi-year lo 8-10-11 (-19.97); multi-year hi 8-31-11 (+11.42)

S&P 500 SUMMARY

Conclusion SPX (1242) dipped and worked off a short-term overbought RSI. The S&P 500 is at the 300-day average (1243) and continues above the 400-day moving average (1212), the 38.2% Fibonacci retracement (1226), and the 100-day average (1231), and the prior trading range top (1231). The pre-crash close of 1260 on August 3 is now appearing attainable. The consolidation and stabilization continues, even a significant rebound, and grinds along after the crash in early August. We expect the negative USA and Global fiscal, economic, and political uncertainties to regain preeminence as earnings season winds down and most likely stifle any ongoing rally. The earnings season rally has occurred and is nearing or is at the top. 1200 continues as the benchmark for the sentiment boundary between some optimism and significant uncertainties. 1260 is the next sentiment boundary which signifies even more optimism.
● Pre-Crash Close 1260 SPX has yet to reach the August 3 pre-crash close of 1260.34. The highest to-date was the intraday high of 1256.55 on 10-24-11. This is the sentiment boundary for even more optimism and places the S&P 500 back to the early August of debt ceiling political gridlock and the S&P downgrade of the USA from AAA.
● 300-day Moving Average SPX has been testing the slightly ascending 300-day moving average of 1242.90, 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 came very close on October 21, at an intraday high of 1239.03. Our best-case scenario during earnings season propels the S&P 500 upwards to a test of this benchmark. This has happened.
● 100-Day Moving Average SPX has rallied and closed above the leveling 100-day moving average of 1230.52 for the first time since July 26! A positive earnings season and more European assurances on the EU Sovereign Debt Crisis triggered the ascent above this milestone.
● Fibonacci 38.2% Retracement SPX rallied and closed above the Fibonacci 38.2% retracement of 1225.70 on October 21 for the first time since August 3. SPX had previously pinned through intraday and closed just below several times since early August. The Fibonacci range utilized is from the the 10-9-07 all-time closing high of 1565.15 down through the 3-9-09 market cyclical closing low of 676.53. A positive earnings season and more European assurances triggered the ascent above this benchmark.

● 400-Day Moving Average SPX has sustained a rally above the 400-day moving average of 1212.08 on October 20, after initially dropping below on August 4. The S&P 500 had several previous failed rallies at or above. A positive earnings season and more European assurances provided the boost to rally above this benchmark once again.
● S&P 500 Outlook The intermediate-term trend indicator is now bullish. The long-term trend indicator continues tenuously bearish. At the present level of the S&P 500, we continue neutral to slightly bullish for October, continue neutral to slightly bearish for November and December, and continue bullish long-term (12 months).
● Global and USA Economy The global and USA economic data is neither very positive nor very negative. No recession or moderate recovery, 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. To us, the economic indicators are dismal, but continue bottom-bouncing to-date and show neither much recovery nor a recession. A video of Achuthan's interview and prediction of the recession is here.

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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