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Friday, February 5, 2010

S&P 500 technical review

Yesterday's slide of US stock markets might have surprised a lot of people. Without doubt it was a fierce and strong decline despite the upward mood of the crowd. One of the biggest problems with the last several increases is the volume behind them. At last there was no one to buy. Some news interpreted as bad pulled the trigger.
Anyway, let's see the graphs.

The 1 hour graph of S&P 500 shows some signs of bullish divergences between the value of the index and the indicators - those marked by the straight red lines. Nearly the same is the picture on the 30min graph.

The decline in the Unemployment rate (which was reported as 9.7% - less than the 10% seen in the last month) might give the market the needed fuel for such a short term increase.

The obstacle before any major increase of the markets at the current time  could be seen on the Weekly graph. The bearish divergence that is clearly seen there takes the lead now. The Stochastic clearly points downward but MACD is still positive. There is a chance that the index gets caught between the two Moving Averages for some time. That would mean a bottom value of about 1035/45 in a first place as that level corresponds well with the EMA50 and 23.60% level of the Fibonacci retracement from the current top. If the markets seeks deeper negativism in order to continue to rise, the next level could be found around 950-1000.

Still the movement of the markets precedes the real Economic news so what we witness from the last days of January might very well be just "selling the news".

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