Saturday, April 25, 2009

S&P 500 Chart

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Did not post any charts lately. In my previous "Simple Technical Analysis" post on April 12, 2009 and "S&P 500 Volatility" post on April 5, 2009 I have mentioned about possibility of the indexes stacking at the levels where the market spend a lot of time in side move. I called those levels sensitive levels. Below I have set 2 charts of the S&P 500 index: 60-day (1 bar = 1 hour) and 1 year (1 bar = 1 day) to show what I wanted to tell.

S&P 500 hourly and daily chart

From the 60-day chart (see first chart at the top) you may see that almost whole April the indexes basically were in the side move. The Dow (^DJI) index was the first index that started to move side-way, then a week later S&P 500index followed this pattern and the Nasdaq 100 index, as always, still could be considered in the up move. From the second 1-year chart (chart at the bottom) you may see that theS&P 500 index stopped its recovery at the same levels where it was in a side move in period from the middle of January to the middle of February 2009. The DJI index stuck somewhat lower and the Nasdaq 100 run over those levels.

Those traders who are more than a year on the market has to know that in the majority situation the indexes are flat in the resistance and the support as a rule is sharp. It could be easily explained by simple fact that greedy buying usually spread over the time while panic selling is always sudden and sharp. Because of that I believe many of technical analysts are asking: "we were in strong recovery… now we are flat… What is the next? Reverse down?"

The answer on this question, I think, lies in the technical analysis of the longer-term trend. If according to the longer-term analysis we are not any more in the recession I would assume that the odds are still on the side of the recovery and we may see some decline after this side-way move and then resumption of the recovery. We already had similar situation from the middle of June 2003 until the end of August 2003, when after strong recovery stock market has been flat for 2 months and then it went back into up-trend for the next 7 months. As I repeatedly mentioned, the stock market cannot move up all the time. During the recovery (or up-trend), time on time, stock market has to release itself from shorter-term overbought conditions. This is exactly what we have right now on my opinion.

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