| S&P 500 Trend Analysis - 10/27/2006 | ||||||||||||||||||||||||||||||||||||
| It was a positive week for the major markets. The Dow and the S&P 500 gained 0.73% and 0.64%, respectively, and the Nasdaq Composite was up 0.36%. | ||||||||||||||||||||||||||||||||||||
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| Long-term perspective: Our perspective has not change. The S&P 500 is now near the long-term channel resistance line. There are two possible scenarios that we would like to consider. 1.The S&P 500 index turns from the channel resistance line and moves down until it reaches the channel support line. 2.The S&P 500 turns from the channel resistance line and moves down for a few weeks to reset overbought technical indicators, and then the index rally again to retest channel resistance. In this scenario S&P may form a rising wedge along the channel resistance line. You can see the similar pattern (highlighted in red) on S&P short-term chart. In both scenarios suggested above the index should turn down near the long-term channel resistance line. S&P 500 index uptrend from 6/14/2006 has 3 waves structure so far. If scenario #2 is correct, S&P 500 index is going to move down, and then the market will rally into the end of the year. It will present waves 4 and 5 to complete 5 waves impulse structure. | ||||||||||||||||||||||||||||||||||||
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| Short-term perspective: To describe the market condition as strongly overbought is not enough. During the last three weeks S&P 500 weekly Williams' % Range was less then 1% four days. Last time we had similar reading in January 2004 during the first rally at the beginning of the current bull market. While such market behavior is quite normal after the strong bear market, it is unusual for a mature bull market. From the technical point of view we should not care what kind of economical or political reasons draw the indicators crazy, but we should consider that stronger indicators usually are followed by the sharper decline. We don't expect a strong Christmas rally now. The S&P 500 weekly and monthly trends resistance is now at 1388.72 and 1391.19. | ||||||||||||||||||||||||||||||||||||
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| Presented by www.thegreedytrader.com Research Group. | ||||||||||||||||||||||||||||||||||||
Saturday, October 28, 2006
SP 500 Trend Analysis - 10/27/2006
