Big Picture Review
By
Rennie on Tuesday, May 17th, 2011 at 9:40 pm
Following up on my last big picture review on 4/18, let’s take a look at those intermediate and long-term signals still in effect…
SPX cumulative breadth recently hit a new 52-week high while the SPX failed to do the same. Over the last two decades this has almost always led to the SPX hitting its own 52-week high within the next month, pointing to an SPX close over 1363 by June 8th. http://markettells.com/2011/05/spx-cumulative-breadth-hits-52-week-high-spx-does-not-what-happens-next/
S&P futures recently tested the 20-day average two consecutive sessions 4/17 and 4/18, closing above the average both days. This has traditionally led to a higher S&P one week later, pointing to an SPX over 1348 on 5/19…
http://markettells.com/2011/05/sp-futures-successfully-test-the-20-day-average/
S&P futures posted two unfilled upside gaps on 4/20 & 4/26, pointing to limited downside potential over the next month and suggesting SPX will be trading above 1333 on May 24th. http://markettells.com/2011/04/gap-gap-gap/
VXO closed down seven consecutive sessions on March 25th, which points to an S&P above 1313 on May 20th. http://markettells.com/2011/03/this-volatility-signal-has-always-led-to-a-higher-sp-two-months-later/
SPX ADT10 closed over 65 on March 30th, which points to limited downside potential the remainder of April and an S&P above 1328 in late September. http://markettells.com/2011/04/sign-of-persistence-from-the-russell-2-day-rsi/
VXO closed up 10%+ two consecutive sessions on March 15 & 16th, which indicates S&P will be above 1256 mid-June. http://markettells.com/2011/03/follow-up-to-vix-vxo-set-to-trigger-bottoming-signal/
S&P YTD positive at the end of February points to an S&P above 1327 end of December. http://markettells.com/2011/03/spx-closes-below-its-50-day-sma-february-effect-reminder/
Seven higher lows on the monthly S&P chart indicates S&P will be above 1327 end of September. http://markettells.com/2011/03/persistent-moves-on-the-monthly-and-quarterly-sp-charts/
Three consecutive up quarters for the SPX indicates S&P will post a quarterly close above 1325 by end of 2011. http://markettells.com/2011/03/persistent-moves-on-the-monthly-and-quarterly-sp-charts/
What I found interesting in reviewing the above signals is that many identify SPX 1325 as a pivotal area. The S&P has been finding support in this area over the last couple weeks and I’d look for this trend to continue. Some charts of interest…
CTA’s remain bullish as evidenced by the Market Vane survey.
Equal Weighted S&P500 continues to outperform SPX as it has for much of the past two years.
Confusion Indexes based on S&P500 components or NYSE common stocks remain low.
Principal program trading activity remains heavy.
Volatility remains low (200-day average of VIX under 20).
(for those links to the interactive charts above, hit the ‘max’ button on the bottom right for a long-term perspective)
I’m not seeing many red flags regarding the market’s uptrend. The Last Hour indicator remains long-term bearish but the timing on this is tricky. Max out the interactive chart and you can clearly see the indicator has led virtually every major up and down move over the last twenty years. The only question is the lead time. You don’t want to jump the gun on this indicator, as the move down from late ’04 to mid-2007 made clear. But it was ultimately right, and when the indicator clearly reversed that long-term downtrend in early 2008 it was a warning that the bearish retracement phase was underway. This time around, we’ve seen no evidence of a similar reversal of the long-term downtrend, with the indicator recently hitting a fresh low just over a month ago. Based on the bullish signals in effect, I’m not expecting the reversal to kick in this year, but 2012 is another story. It will have been over 2 1/2 years since the start of the Last Hour’s decline at the end of this year, a bit longer than the indicator’s last decline in ’04-’07 (which was the longest lead in the history of the indicator). Assuming the lead time isn’t going to stretch over 3 1/2 years, it appears likely we’ll see a reversal in the Last Hour sometime in 2012, potentially early in the year.
Big Picture Review
By Rennie on Tuesday, May 17th, 2011 at 9:40 pmFollowing up on my last big picture review on 4/18, let’s take a look at those intermediate and long-term signals still in effect…
SPX cumulative breadth recently hit a new 52-week high while the SPX failed to do the same. Over the last two decades this has almost always led to the SPX hitting its own 52-week high within the next month, pointing to an SPX close over 1363 by June 8th. http://markettells.com/2011/05/spx-cumulative-breadth-hits-52-week-high-spx-does-not-what-happens-next/
S&P futures recently tested the 20-day average two consecutive sessions 4/17 and 4/18, closing above the average both days. This has traditionally led to a higher S&P one week later, pointing to an SPX over 1348 on 5/19…
http://markettells.com/2011/05/sp-futures-successfully-test-the-20-day-average/
S&P futures posted two unfilled upside gaps on 4/20 & 4/26, pointing to limited downside potential over the next month and suggesting SPX will be trading above 1333 on May 24th. http://markettells.com/2011/04/gap-gap-gap/
VXO closed down seven consecutive sessions on March 25th, which points to an S&P above 1313 on May 20th. http://markettells.com/2011/03/this-volatility-signal-has-always-led-to-a-higher-sp-two-months-later/
SPX ADT10 closed over 65 on March 30th, which points to limited downside potential the remainder of April and an S&P above 1328 in late September. http://markettells.com/2011/04/sign-of-persistence-from-the-russell-2-day-rsi/
VXO closed up 10%+ two consecutive sessions on March 15 & 16th, which indicates S&P will be above 1256 mid-June. http://markettells.com/2011/03/follow-up-to-vix-vxo-set-to-trigger-bottoming-signal/
S&P YTD positive at the end of February points to an S&P above 1327 end of December. http://markettells.com/2011/03/spx-closes-below-its-50-day-sma-february-effect-reminder/
Seven higher lows on the monthly S&P chart indicates S&P will be above 1327 end of September. http://markettells.com/2011/03/persistent-moves-on-the-monthly-and-quarterly-sp-charts/
Three consecutive up quarters for the SPX indicates S&P will post a quarterly close above 1325 by end of 2011. http://markettells.com/2011/03/persistent-moves-on-the-monthly-and-quarterly-sp-charts/
What I found interesting in reviewing the above signals is that many identify SPX 1325 as a pivotal area. The S&P has been finding support in this area over the last couple weeks and I’d look for this trend to continue. Some charts of interest…
CTA’s remain bullish as evidenced by the Market Vane survey.
Equal Weighted S&P500 continues to outperform SPX as it has for much of the past two years.
Confusion Indexes based on S&P500 components or NYSE common stocks remain low.
Principal program trading activity remains heavy.
Volatility remains low (200-day average of VIX under 20).
(for those links to the interactive charts above, hit the ‘max’ button on the bottom right for a long-term perspective)
I’m not seeing many red flags regarding the market’s uptrend. The Last Hour indicator remains long-term bearish but the timing on this is tricky. Max out the interactive chart and you can clearly see the indicator has led virtually every major up and down move over the last twenty years. The only question is the lead time. You don’t want to jump the gun on this indicator, as the move down from late ’04 to mid-2007 made clear. But it was ultimately right, and when the indicator clearly reversed that long-term downtrend in early 2008 it was a warning that the bearish retracement phase was underway. This time around, we’ve seen no evidence of a similar reversal of the long-term downtrend, with the indicator recently hitting a fresh low just over a month ago. Based on the bullish signals in effect, I’m not expecting the reversal to kick in this year, but 2012 is another story. It will have been over 2 1/2 years since the start of the Last Hour’s decline at the end of this year, a bit longer than the indicator’s last decline in ’04-’07 (which was the longest lead in the history of the indicator). Assuming the lead time isn’t going to stretch over 3 1/2 years, it appears likely we’ll see a reversal in the Last Hour sometime in 2012, potentially early in the year.