Sunday, August 17, 2008

S&P 500

Follow Me on Facebook Follow Me on Tweeter
In my last "New Highs/Lows" post on August 12, 2008 I have reviewed my longer term outlook based on technical analysis of 1-year index charts with mentioning that over the shorter term I see oversold levels on Nasdaq 100, S&P 500 and DJI indexes - we saw a dive on the market on August 13 with some recovery by the end of the week.

In majority cases the reversal point after down trend (support) is very sharp and sudden. In opposite a reversal point after uptrend (resistance) is not as volatile and as a rule spread over the time when we may see almost flat market. We had up-move after August 1st and then some decline with Flat market after August 11th.  Now, my shorter-term main question is "Does the market released the oversold pressure over the last week and now it's ready for go further up? or the stock market levelled the indexes before deeper slide?". Keep in mind that I'm referring to the shorter-term trends. My longer-term technical analysis is basically unchanged and I still in Bullish mood and believe in higher odds to see the indexes higher than they are today (refer to my 1-year technical analysis in my "New Highs/Lows" post on August 12, 2008 and my "DJI" post on July 20, 2008).

Chart 1: 60-day S&P 500 Chart technical indicators
S&P 500 chart

From the chart above I may see that my S&P 500 technical indicators are bullish, yet, some of them close to become bearish:

  • SBV - Bullish - The SBV moves up pointing to the positive sentiment;
  • MVO - Bearish - The MVO shows high volume surges during the recovery in the period from July 22, 2008. Each time after such volume surge we saw small correction, however, we did not see high volume surges during these corrections (absence of red MVO). From one side it tells us that high volume surge during the up-move is needed to push the S&P 500 index down, yet much smaller volume is needed to reverse the S&P 500 index back into up-trend and this fact confirms my longer term outlook. Yet these volume surges are making an input into moving the index into oversold levels which may push the market into stronger correction;
  • Advance-Decline Issues Oscillator - Bullish/Bearish - The AD Oscillator is at high positive level, yet it started to move down by pointing to the possible beginning of the changes in the sentiment towards the declining stocks;
  • RSI and Stochastics - Neutral - The RSI and Stochastics are on the edge of 70 and 80 levels respectively. Should they start to move down it may point to Bearish trend. Should they go back above their critical lines it would point to the possibility of further Bullish trend;
  • MACD- Neutral - The MACD is flat and basically neutral;
  • McClellan Oscillator - Bullish - The McClellan Oscillator is on its way up and is Bullish at this point of time.
The DJI 60-day chart looks similar to the S&P 500 chart above. Yet, the Nasdaq 100 60-day technical analysis is more negative by pointing to the higher odds of a possible slide into correction. For the Nasdaq 100:

  • SBV - Bearish - The SBV moves down;
  • MVO - Bearish - The MVO shows absence of red (high volume during the price drop) and shows a lot of green (high volume during the price rise);
  • Advance-Decline Issues Oscillator - Bearish - The AD Oscillator is on its way down;
  • RSI and Stochastics - Bearish - The RSI and Stochastics dropped below 70 and 80 levels respectively;
  • MACD- Bearish - The MACD is on the down side;
  • McClellan Oscillator - Bullish - The McClellan Oscillator is on its way up, yet it is still below zero line.
Overall, by analyzing 60-day technical indicator I may say that I see the possibility of the correction down, yet, at the same time I see the possibility of the scenario when the market can ignore the Nasdaq 100 bearish indicators and move up under the pressure of the Bullish parent longer-term trend. I would say that for me, the shorter term trend is undefined at the current moment and one of the conservative strategies in such situation could be staying in cash until I see the Nasdaq 100 become bullish or the S&P 500 and DJI more bearish.

No comments: