Thursday, May 14, 2009

S&P 500

Follow Me on Facebook Follow Me on Tweeter
It has been for a while since I post a chart in my blog. I usually do not do any technical analysis posts during the week (as a rule I do it on week-ends), yet, I'm just have time to put a few notes. By referring back to my previous week "Industrial and Financial Sectors" post where I mentioned about a possibility of shifting in supply/demand balance which may lead to the dominance of bearish sentiment on the market and as a result to the correctional move down, I may say that this week we saw this move. The strongest drop has been noted in the Nasdaq 100 sector. Actually this was the strongest Nasdaq 100 index drop since March 9, 2009 (reversal day - see my "DJI Chart" post on March 1, 2009 where I predicted that reversal). I cannot say it about DJI and S&P 500 indexes, on the other hand these indexes did not run up as high as Nasdaq 100.

Today we had a positive session - some recovery after the down turn. There is always a traditional question: What is next? Will market go up? or will it drop further down? From the S&P 500 chart below you may see that majority of the technical studies I use in my technical analysis are bullish and point to the good odds of the further recovery. The last Bearish volume surge in the S&P 500 and Nasdaq 100 sectors confirms it. However there is a few factors that make me hesitate about expectation of a strong recovery. There are a some of them:

1. I have not seen Bearish volume surge (volume surge during the price move down) in the Dow Jones Industrial index;

2. Since March 9, 2009 the market has been moved strongly up and we have not seen any strong correction;

3. The first correction during the 2 month recovery was at the end of March 2009. This correction was not a strong one nor a prolonged one. As a rule second correction should be stronger because it is further from the March 9 bottom and market become more overbought as it was in March;

Because of that, at this point of time, even if I see further recovery I would not expect the market (indexes) to go higher than May 8, 2009 highs. At the same time I would more closely watch the intraday charts since there are good odds we may see market reversed down again. The good news is that is that volatility goes down: VIX (volatility index) moving lower, ATR (Average True Range) is moving down as well (I monitor them on daily chart). That tells that it is very unlikely to have crash down. Stock market becomes more quiet and if we see correctional move down it should not be a dramatic movement.

S&P 500 chart analysis

No comments: