S&P ended the week flat losing 5 points, -0.4%.
This is a weekly chart
There are a few things that I’d like to point out on the above chart.
First of all, there is no clear winner among a number of wave configurations that are active. I have 4 different alternates for January peak. Only one of them is extremely bearish and that one look extremely dubious at this time.
Another point is that the lows of July and Feb form a picture perfect channel (dashed black) around price action, with an actionary median line from November low (thin blue line)
Now, note that weekly corrected in Feb slightly below the area of a half range marker (1070) that I have had on the weekly chart as a median line of an actionary price zone for many months.
Notice that all weekly MAs are flattish and compressed around that area. As long as index remains in the channel, above its MAs, above the support zone, it has a positive technical profile.
This is clearly an area of strong technical support. It is, IMO, all a laid back, longer term player with mature positions need to know to assess risk and take risk mitigation actions.
It also can help a shorter term player in the sense that it was the area that squeezed the shorts and failed the bears after Feb 5 low.
A loss of this support area may embolden the battered bears and target 1000 as a somewhat weak support and 950 as a much stronger area of support
This is a daily chart of the index
This was a week of low volume action with what looks like 2 distribution days. Index is clearly not out of the woods, but it has firmed its technicals quite a bit. It’s resting above compressed, yet cradling MAs. It’s hitting against some short term resistance lines. It is in the lower range of our 1107 pivot.
Right after Feb 5 low, I said that the market had entered a state of equilibrium. That has changed and now we have a positive bias that favors the bulls. But situation is still tenuous. Bulls need to take the index strongly above all the short term resistance and put some distance between the price and its longer term MAs. If they do that, volume may appear as index puts pressure on bystanders and remaining shorts.
There has been a marked improvement in breadth
McClellan Oscillator made a new high after Feb low. In previous occasions during the rally off the March low, this led to further price gains. Summation Index has also registered a buy from close to neutral. That, as well, led to further price appreciations as market rallied in 2009. Same is true of MACD buy signal from below zero, Bullish Percent Index buy signal and a host of others.
Bears keep constantly telling us that sentiment is bullish – whatever the hell that might mean. They also say that volume is absent, but volume has been shrinking on aggregate since March 2009, and that has not kept the bears from being roasted alive as market marched on.
The short of it is that bulls have all the technicals lined up. Bears, well, I don’t know what they have.
Now, if all the technicals that bulls have lined up fail to deliver, and technicals roll over, and support fails to hold, then, we can interpret that as a change in inherent characteristics of the market and its price action.
Shorter term, I have been of the thinking that we had not seen the last of the current mid-term downtrend and further softness would be seen prior to more meaningful price gains. I still think so, but, first, as I have repeatedly said, it really does not matter what I think, we follow our charts; second, price action these past few days has made me doubt that line of thinking.
This is 60-min chart of the index
We have had a short term downtrend from Feb 20, but bears have not really capitalized on that. We have a well constructed channel on the chart above. Bulls need to take the price to the upper half of that channel. For now, 1080 – 1090 area seems to be good first zone of support. Further below, as long as price stays above 1061 pivot, it’s either consolidating or rallying.
Bears, if they are serious and have enough capital and conviction to make a difference, should break 1080 as a start and then take the index below 1061.
Support is at 1090 and 1061, resistance is 1107 and 1133.
Long term trend is up. Mid-term trend is down. I think short term trend is neutral (a move above 1110 may indicate a short term uptrend is underway).
Have a Nice week!
S&P 500 – May 15, 2012 - Bottom Line: Long term trend is up. Mid-term trend is down. Short-term trend is down Weekly S&P stage is Late Advance (2-C) Daily S&P stage is Strong Decli...
1 year ago