Midweek SP 500 Overview

Nov 19, 2008: 7:31 PM CST

Now that today’s close is firmly in place, we have a potential game-changer in terms of the technical structure.  The monthly chart also shows a major bearish development  Let’s look at the current S&P 500 chart closely to see what this means.

S&P 500 Daily:

Not a whole lot has changed on the daily structure, provided you note that today’s price marked a fresh 2008 intraday and closing low at 805 which takes us back to levels not seen at all since 2003.

Price etched out a ‘trend day down’ today which took the form of one of the most bearish ‘candle’ structures possible (open at one extreme, form a long range, close at the opposite extreme).

I don’t want to get too caught up in the bearishness, but note that the new price low is occurring on a multi-swing positive momentum divergence.  Still, that doesn’t change the picture drawn by the trend structure and moving average orientations.

I did want to highlight (at least) two major developments on the monthly chart, one of which changes the game completely that you might miss otherwise.

S&P 500 Weekly:

First, let me note that the intra-month low is currently 805, which takes us beneath the closing low of the entirety of the 2000-2003 bear market.  That monthly closing low was 815.  Now, the month of November is not over yet (though we’re down 16% already – a ghastly figure) and we could still hold that closing low, but if we don’t, you need to pay close attention to what that means.  Look to see if we end November above or below 815.  Also, look to see if we breach the absolute price low of the prior bear market at 775.  Keep in mind that value IS a price target eventually so let’s see how price reacts to those levels.

Second, the momentum oscillator – the difference in a 3 and 10 month EMA – (a standard MACD) is registering a significant new momentum low at -200.  That means that there is a -200 point spread between the 3 and 10 monthly EMAs – that’s huge and sets a record price (indicator) low.

Third and perhaps most importantly, look at the orientation of the 20 and 50 month exponential moving averages – they have formed a bear (some say “death”) cross.  I want to make two sub-points here.  First, that is a sign of major bearishness, as price has moved a great distance to have the shorter 20 month EMA cross beneath the longer 50 month EMA.  Interestingly enough, moving average systems are triggering fresh ‘short-sell’ positions, but moving average systems far lag the price and I find little to no value using them on long-term charts – that’s my opinion though.

Second, if you look closely – I’ll try to sprinkle a bit of bullish news despite everything to the contrary – the last time the 20 month EMA crossed beneath the 50 month EMA was roughly mid-2002, about 6 or so months prior to the absolute bottom in the market.  If you absolutely want to find bullish news in all this, there it is.  Moving averages lag price – sometimes by a good deal – and the last time this structure set-up, we were near a bottom.  Of course, price moved from 1,050 to 800 before the bottom was found (after the bear or ‘death’ cross) but eventually the bottom formed.

Keep managing your risk, preserving capital, and staying on top of any new information as it comes in.

The Market Club does a great job of providing daily commentary, charts, videos, signals and the like – be sure to check them out if you have not done so already.

Stay safe and don’t be disheartened.

5 Comments

5 Responses to “Midweek SP 500 Overview”

  1. Anonymous Says:

    Hi Corey, always a pleasure reading your insight. Do Market club charts offer all the same technical data as the stockcharts.com charts you use here? I am thinking of signing up. Thanks and keep up the great technical analysis.

    Matt

  2. Andrew Knight Says:

    Hi Corey,

    I’m emailing you in regards to a followup email I sent you a month ago in response to a partnership, have you had a chance to think about it?

    If you have any questions or would more information, please advise me and we can go from there.

    Kind Regards,
    Andrew Knight

  3. Corey Rosenbloom Says:

    Matt,

    Market Club offers standard TA tools, but StockCharts has cleaner layouts and offers more indicators, plus the ability to do a couple more annotations. I’ve used StockCharts for over 5 years now so I clearly prefer their charts but what sets the MarketClub apart is their proprietary signals which are derived from a composite of technical and trend indicators into a composite signal or as they call them “trade triangles.”

    Plus, Hewison and others give feature articles/posts on developing technical conditions across various key stocks and the major markets (oil, gold, a few in FOREX) and is also educational based – though StockCharts offers an impressive body of knowledge and chart examples as well.

    You’re welcome to give it a try with a one-month free (money back) trial to see how you like the service. Please let me know if you have additional questions and thank you for reading.

  4. Anonymous Says:

    Thanks for the reply. Can you run real-time charts with Marketclub? Multiple charts in multiple browsers? I will sign-up through your site when I get a subscription as I assume you can make some affiliate cash 😉

  5. Corey Rosenbloom Says:

    Matt,

    Stocks/ETFs are based on slightly delayed data with the exception of FOREX and spot metals being real-time. That’s one draw-back but MarketClub tends to focus on the weekly and daily charts in terms of technical analysis (of trend, structure, signals, etc) and use multiple timeframes for analysis and entry.

    You can also open multiple windows and can drag them as normal across different monitors as well. I would probably use MC as a more analytical tool than a gutsy, bold, high-intensity intraday trading platform. It’s designed for assessing trend congruence and aggregate technical (indicator) signals mainly on weekly and daily charts. The commentary is mainly geared to that as well.

    In full disclaimer I do receive a small commission, and also have a good relationship with some of the people there at INO and MarketClub, though I would recommend it without that. The INO education portion (hundreds of videos) is worth it alone but you get insights from Adam, signals, etc. I think you may also get a slight discount going through me (or an affiliate) than if you just bought it outright but I’m not entirely sure about that. The ‘try it free for a month’ or ‘one month guarantee’ or something may be based on signing up through an affiliate – not sure about the details on that though.