S&P 500 Index (SPX) Chart Analysis
Last week we wrote:
"...To start right off, the chart is still bullish. You can see this is not the first short term correction from gains made since the March bottom. But at the same time, there is little room left on the downside before this position will take a cash position to protect capital."
The S&P 500 Index - SPX roared to life this week and in doing so, triggered several bullish indicators, forecasting higher highs in coming weeks.
The declining trend resistance line, that has contained advances since early this year, was finally surpassed to the upside in Friday’s rally. This is a strong bullish indicator considering the length of time this resistance has stopped advances.
The 50-day moving average has again turned higher.
The target for this advance is now at SPX 1416, the 50% retracement of the entire half-year decline. A close above 1416 would forecast a run to at least SPX 1454.
To recap the previous bullish indicators still in place; we have three better than 9 to 1 up volume vs. down volume days for the NYSE, in just over a month's time. 9 to 1 days are considered rare events, though the past year has been peppered with them. Still, they do tell us that there have been three recent breadth explosion days, typically only seen at the beginning of substantial new up-trends.
Such bullish moves have an historical track record averaging 10-14% gains in six months to a year. With three 9 to 1 days now in a month, it is a substantial bullish signal that higher highs, for a substantial time-frame, are ahead.
Our stock and ETF strategies are starting to find good buys. Stocks and ETFs have been pushed down to extremes, and finally some are working their way up from those losses to become buys for these strategies.
The CBOE Volatility Index - VIX signaled panic lows twice, in January and March. Since that time it has not traded to levels that would forecast a decline. The expected advance, after seeing such bullish sentiment signals, remains far short of completion, but this week's advance may well be the start.
The Nasdaq indexes, discussed below, are even more bullish than the SPX. This is as it should be at the start of a healthy market advance, with the Nasdaq indexes leading the way higher.
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Yes there are still bearish indicators. On the bearish side;
Elliott Wave Theory is still bearish and calling for new legs down in all the major indexes. We will just have to see how this plays out. Elliott Waves have a good track record but are open to huge amounts of interpretation which is why we watch them, but do not trade them.
The SPX remains well below its 200-day moving average. Of course, a new trend must eventually start below this average, so this is not as bearish as it seems.
Our outlook is considerably more bullish after this week's breakout gains. The SPX should reach at least 1416 before sellers step in and slow things down. But even this strong resistance level is unlikely to stop a new bullish trend.
If this is the beginning of a new advancing trend, it should last for a substantial time frame. Six-months to a year would be about right. Trends typically last longer and move higher than anyone expects.
Please read: This is an aggressive. For those who overly worry about short term swings in the financial markets, remember that you do not have to be an aggressive timer to be a profitable timer. This strategy can and does incur small losses on occasion. Money is made in both aggressive and conservative style trading. Our Conservative S&P Timer strategy trades only the long term trends but that means it profits without the numerous buy and sell signals that active and aggressive traders take.
The SPX portion of this strategy is in a BULLISH position. We are now in the Rydex Nova Fund - RYNVX (or other bullish S&P 500 index fund) for both active & aggressive traders
S&P 500 Index (SPX) Daily Chart
Nasdaq 100 Index (NDX) Chart Analysis
Last week we wrote:
"...While all the indexes moved lower this week, the NASDAQ 100 Index - NDX, used in this position, had the least downside and on Thursday had a solid rally that almost closed at the highs of the entire March to April advance. Friday's news related decline caused almost all the losses."
In last week's declines, the NASDAQ 100 Index - NDX held up better than the SPX and declined only to strong support levels. This week those support levels were the springboard for a powerful rally.
The NDX chart is the most bullish with two gap higher days this week, on Tuesday and again on Friday. Typically gaps are filled, but not always. We will be watching for signs of this next week.
The NDX is also above its 50-day moving average and well above the declining trend resistance line it surpassed several weeks ago (see below chart). The 50-day moving average has been moving higher for this index, since late March.
The NDX was the first to issue a new buy signal and is clearly the leader in this advance. That is as it should be as sustained market advances are typically led by the Nasdaq indexes.
The target for this advance is at NDX 1951, the 50% retracement of the entire market decline. if this level is surpassed, the forecast will be for NDX 2020. Somewhere in there we will be looking for the next healthy correction.
The NDX portion of this strategy is in a BULLISH position. We are now in the Rydex Nasdaq 100 Fund - RYOCX (or other bullish Nasdaq 100 index fund) for both active & aggressive traders.
Nasdaq 100 Index (NDX) Daily Chart