S&P 500 Chart

Last week I was bearish (see my previous week "S&P 500 and DJI post")– not as much this week. This week we saw nice volume surge during the price decline - see red MVO (Market Volume Oscillators shows how big volume surge is in relation to the recent average volume). I mentioned last week in the same post that it would be nice to see a volume surge which could mark the panic selling during the decline and possibility of reversal. Now the question is if this volume surge is big enough to reverse the market from the correction.

The volume surge on July 8, 2009 was quite big, yet not as big as the one on May 20, 2009, May 6, 2009 or April 20, 2009. However, since the middle of the May 2009 the average volume is down and in relation to this volume the volume surge on July 8 could be considered big. I would say that because of this volume, we may see up-move for a couple of trading session. If it happens I would recommend monitoring charts more closely. The other technical indicators (beside volume and MVO) on the hourly charts are mostly bullish as well and I would say that my technical analysis shows good odds for the S&P 500 index running over 900 and the DJI index going above 8,400.

However, the correction we have now is quite big and prolonged (I have alerted about it almost two months ago) and it is difficult to believe (still possible) that this single volume surge may mark the end of this down move. That is why I would recommend monitoring charts over the next couple of sessions. If the recent volume surge is ignored and the indexes go down again then I would consider the stock market in serious trouble. If at this moment hourly charts (1 bar = 1 hour) are more or less bullish then I would not say the same about longer-term charts. I you take a look at 3-year chart (1 bar = 3 days) you may see what I mean – the next check point for the S&P 500 and DJI indexes could be April 21, 2009 lows (I do not mentions the Nasdaq 100 because it nos heavy loaded by financial and automotive companies that trouble the market).

Chart 1: S&P 500 hourly chart with elements of technical analysis