US stock market technical analysis - S&P 500, daily, 07052010

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The daily graph of S&P 500 (SPX) stock index shows the market being in a strong downtrend. Yesterday's plunge of about 10% was the reasonable result of series of days in which the market tried to compensate negative movements from the previous days. It wouldn't be much of a surprise if the big drop that took place almost in an hour was caused by automatic trading machines which triggered sell orders given the particular stop levels were reached.

Stochastic points a bit upward for today and in the pre-market the players tried to regain some of yesterday's loss of the S&P 500 index.

In a more close time-frame what is seen on the 4 hour graph of S&P 500 is that Stochastic is gaining height while still the value of the index stays bellow its previous heights. This could show us a possible attempt of the market to lift the index on the first time but as the MACD is still negative a further deeper decline after that attempt is possible. This comes in line with the Daily graph of the index.

Still the big picture looks considerably negative for the index and the stock market as a whole.
On the weekly graph there is a clear bearish divergence seen (shown by the blue lines).
The bullish divergence that took place almost a year ago pushed the markets to its recent heights but it looks now like being exhausted.
Should the bearish divergence takes the lead we could expect e deeper decline of the markets.