Monday, December 24, 2007

S&P 500

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The up-trend forces the market to move towards the December 11, 2007 high. In general the indicators favors the current recovery, by confirming my past assumption that the recent drop was not more as a correction within the dominant mid-term up-trend, yet, unexpectedly strong correction for me.

The positive sign for mid-term up-trend continuation is the further VIX decline. The fact that this is the last week of the year and most like it will go under the light trading volume makes me optimistic to see the indexes higher. Another fact is (see my 1-year chart below) that during the recovery we still did not see the big volume surges, however, we should not forget that the last correction was not caused by high volume as well… In addition I like the fact that all indexes – NASDAQ 100, S&P 500 and DJI – are moving in the same direction and we do not see a divergence any more when the NASDAQ pushes lover while the S&P is trying to climb up and vise versa.

SP 500

The smaller 60-day timeframe is less optimistic then the 1-year chart. See 60-day S&P 500 chart below. Yes, while we see the SBV advancing, RSI above 70, Stochastics above 80 and VIX declining we should not worry about decline (correction). On the other side we may see that advance decline lines (issues and volume) started to decline by indicating possible weakness. In addition we may see high volume surge during the S&P 500 index move up on December 21, 2007 which could lead the index into the correction down. This chart would make me assume that we may see the advancing market slowly moving into the flat market with possible correction down.

It’s difficult to say anything about correction now. This chart is still bullish, but it already has some force that may cause the correction. I would continue to monitor this chart to see the development of these technical indicators.

SP 500

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