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Thursday, October 22, 2009

"Bullish markets climb a wall of worry"

A little quick technical overview of the S&P500.

For over a month more and more people are expecting the index to turn down and still it continues to go up with some sideways in the way.

The bullish divergence noticed in the Bear trap post from March 2009 resulted in a very strong movement upward.
The outer noise seems quite irritating now and we hear and read about contradicting expectations in all the media. This seems like a clear example of the saying that "Bullish markets climb a wall of worry". :)

So let's see some graphs.

This is a monthly graph of S&P 500 (SPX) for a period of about 10 years. The red line shows some possible resistance levels. That is about 1175-1200. At that point the markets have had resistance points two times - at the first half of 2002 and again in 2004. The same levels have played the role of support points in 2001 and 2005. This alone should speak of the importance of this level range.
The second issue with these figures is that there lies the EMA 50 on the monthly graph.
The third interesting thing we see on this graph is the slow Stochastic which shows the market gets sort of overbought. Still the MACD is right about to go into the positive side. Time will tell if this deserves a better attention.

The weekly graph confirms the current movement may still have some way to go upward. The stochastic is pointing up, but the MACD is making lower highs while the index continues to make higher highs. It is interesting how this will unroll because it could be either a hidden divergence confirming the upward trend or a real divergence which will show the trend is about to turn.

The more closer look (the daily graph) explains the current ups and downs and why there could be some pressure for a downside movement in the short run. At least to the EMA 50 which is about 1045-50.

Time will tell if these thoughts are right.

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