We recently showed some very long term charts going back to 2009 to get big picture perspective for the broad stock market. But a more apt trend to focus on in the near-term is a bit shorter trend (although it is still fairly long). First is the S&P 500 Index (SPX) (SPY) stripped down, ‘clean’ chart from the November 2012 key low to the recent September 2014 all-time high (which for now is a key high). Beyond that, we’ve also pictured a more indicator-filled chart comparing the recent ‘V’ stock market reversal bottom to the one that occurred in Jan/Feb 2014.
The bigger picture trend chart is first below. Note that the Nov 2012 low is the last time we broke the 200 day simple moving average until we did last week. The first Fibonacci Retracement on this trend is the 1859.75 level, which held extremely well as support on the recent sharp pullback. We’ve now since overtaken the 200 day MA as well.
For now, we’re back into somewhat bullish mode, but with the cavaet that we’re kind of in a ‘no man’s land’ between this 1860/1910 and 2000/2020 range. There is various support and resistance between those areas, but that is really the key SPX range to focus on going forward. A trading range for several weeks/months between that range is possible.
However, given the recent strength of the rebound (and the similarity to the ‘V’ bottom the market had in February 2014), we could also blast right on through to new highs by year-end. That’s the second chart below with Percent R and Band Width Indicator.
On the downside, if we do have further breakdown in this trend — watch the 200 day MA and that first Fibonacci level. Beyond that, the next key Fibo level is 1761.06 — and further down to a total 50% Retracement of 1681.31 (that is around the 1700 level that is also a longer-term Retracement level.
SPX Daily Chart with 200 Day Moving Average & Fibonacci Retracement
SPX Daily Chart ‘V’ Bottom Comparison
MW co-Portfolio Manager, Rapid Options Income & ETFTRADR BigTrends.com