A crucial moment for the S&P500

S&P nearterm

Today I am initiating a new video summary that is embedded in the blog. I hope to have a video add-on to this blog about once a week. Over time, I am sure the videos will evolve – for now, I will touch on a single chart and try to add a bit of colour through the video.

The S&P is forming a right-angled triangle on the daily chart. Triangles can be transitional (i.e. leading into a trend change) or continuation patterns. The only way of identifying whether the pattern will lead into a trend change or a continuation of a trend is to watch for a breakout. A breakout to the upside, which in the S&P’s case will be through 2120, would be bullish. A breakout below around 2080 (which coincides with the 50day MA at around that level) would be bearish. Its hovering around that level as of Wednesdays close (the video’s chart is a day shy of the above chart). In either case, you should adhere to my “3 day rule” (per my book Sideways). That is, wait 3 days or more to determine if a break is real, or a head-fake. Rising volume would be ideal on such a break as confirmation of the breakout – but it’s not absolutely essential.

The current chart shows us that money continues to flow positively into the S&P500- via the rising Accumulation/ Distribution cumulative line at the bottom of the chart. Shorter termed momentum oscillators RSI and Stochastics are meandering – providing no clues to future direction. However, MACD is diverging. MACD diverged against the uptrend in late 2014, and that lead into a fair amount of downward-biased chop.

The bottom line at this juncture is to watch for which way the triangle breaks. That will provide us with the market’s near termed outlook.

5 Comments

  • Congratulations on your new video format Keith. Very beneficial and insightful as always.

    Reply
    • Thanks Bob–this was my first run–I learned a few things that I’d like to change–for example, new videos will be about half the length of this one, and I am going to try to improve the sound and a couple of other tweaks. I think these video’s will be an excellent learning tool for readers.

      Reply
  • At just over 7 minutes, I wouldn’t worry too much about cutting the length in half Keith… It’s just about the length of an average video on Kitco, and most people here enjoy your insights… 3 to 4 minutes would be too short, imo.

    Reply
  • Keith
    It seems to me that your chart is a daily chart but your moving averages are calculating for a weekly chart.
    Isn’t the 200 day sma at 2030?

    Reply
    • By gum, you are correct Bruce! I use weekly’s so often that my default MA is the 40 (week)–s/b changed to 200–which I am going in to do right now–thanks for noting that!!!!

      Reply

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