Monthly Archives: March 2016

Out Or Down

Its break-out or break-down time for the S&P 500. The next few days should provide a very potent indication for how the index will move next. The index tapped the top of a pocket that has seen the index roll over multiple times in the last six months.

S&P 500, 4 hour bars

S&P 500, 4 hour bars

The question is, will momentum carry the index through resistance and on up to the all time highs?

Blue Channel

The S&P 500 received a major boost from Fed Chair Yellen at the Economic Club of New York today. The suggestion that the Fed is in no hurry to raise rates sent the index significantly higher, closing the day within the top-most segment of a major downward trending channel, the blue channel on the 2 hour chart below. The range is pretty tight and falling, but currently encompasses the span roughly the 2054-2072.

S&P 500, 2 hour bars

S&P 500, 2 hour bars

The S&P has been in this channel a couple of times before, most notably on November 3rd and December 2nd of 2015. Both times, the market failed to progress and gave traders a good entry for a near term short opportunity, as we can see on the daily chart below.

S&P 500, daily bars

S&P 500, daily bars

However, the index returns to the upper end of this declining channel this time capping off a very strong and consistently trending run off of the February lows, and it remains to be seen whether momentum will carry the S&P straight through resistance and on to the all time highs. For any traders out there inclined to take the short side of this market, the best point of entry will likely follow a) a failure to break above the upper channel bound at 2072 AND b) a break back BELOW the lower channel bound at 2054. Without either of those price confirmations, the short side looks fraught, to say the least.

Should the S&P hold above the levels breached today, we could very well be opening up a clear path back to the all time highs and above, a prospect nearly unthinkable just six short weeks ago. But the possibility is there, and its real. We’re at a point in price and time where it does not pay to give the market the benefit of any doubt or take any view for granted. This is a point where careless positioning and poor risk management will likely cost investors quite a bit.

Happy investing, and good luck out there.

Ringing the Bell

The rally off the February lows came swift, and it came strong. We’ve moved back to the top of the recent downward trending range, in blue on the 2 hour chart below.

S&P 500, 2 hour bars

S&P 500, 2 hour bars

As you can see, we’re now at a point where the short term and medium term trends are directly at loggerheads. This is one of those points where careful attention to price behavior is very important for clues regarding how to position for the next move.

S&P 500, daily bars

S&P 500, daily bars

As the daily chart show, over the last 10-11 months, the S&P has been here a few times before, “rung the bell” and turned right around, peeking its head above a couple of times. Still, this has proved to be a good place to sell on more than one occasion, and odds are good that it will be again.

However, there is always a risk that the market will simply blow through the resistance and keep heading higher. So it pays to never give it the benefit of the doubt. Decent selling points have consistently been presaged by an extended period of back a forth below resistance, trying to move higher, but suffering from a persistent case of failure to progress for at least a few weeks. So it may be wise to give this market some time to show its hand. It may look set to continue higher, but it may also be bluffing. Time will tell. Generally the best position entry points appear only after a number of decent, or even good, ones have come and past. Patience is a virtue for the successful investor.

Good luck out there.

BREAKING NEWS: S&P 500 closes above 200 day SMA for the first time in 2016

If the bulls were looking for a reason to pop the cork, this afternoon brought it. The S&P 500 closed above its 200 day moving average, 2019.91, for the first time since just before new years on December 30, 2015. Friday afternoon’s close took the market over that mark by a few points, closing at 2022.19. This follows what has been a very strong multi-week move higher off the low reached on February 11th, evident below on the daily chart.

S&P 500, daily bars

S&P 500, daily bars

This strengthens an already strong technical backdrop for US equities in what has otherwise been a challenging year for stock investors. While the picture has improved, challenges remain as the 200 moving average continues to move lower, and significant technical hurdles remain intact above currently levels, compounding the mixed fundamental profile for US stocks.

For traders, caution remains warranted. Particularly once the critical 2060 level is reached. Still, the odds likely favor continued upside from these levels, absent significant unforeseen shocks to the markets.

Taking the Long View

This post is going to be a chartfest, pure and simple. I’ve got a selection of S&P 500 charts (my specialty) here ranging from 30 minutes to yearly OHLC bars, but all with the same levels I’m following retained to help give an idea of the scale of the current operative range on the S&P 500, from a close look at the recent trading levels zooming out to a the multi decade trend we’re still moving within.

I will add more commentary in subsequent posts, but for now, I will let the charts do the talking.

S&P 500, 30 minute bars

S&P 500, 30 minute bars

S&P 500, hourly bars

S&P 500, hourly bars

S&P 500, daily bars

S&P 500, daily bars

S&P 500, weekly bars

S&P 500, weekly bars

S&P 500, 8 day bars

S&P 500, 8 day bars

S&P 500, yearly

S&P 500, yearly