SPX S/R Week of 3/12/12

The broad markets tumble last Tuesday, only to recover quickly in the back half of the week when the Fed leaked the news about a potential sterilized quantitative easing program. The crack cocaine QE bounces markets every time, the broad indexes are addicted to the easy money. The problem is that the markets continue to move up based on stimulus alone (LTRO1 and LTRO2, Fed maintaining low rates thru 2014, Fed's sterilized QE news, China easing, BOJ easing, and all the emerging countries jumping on the easing bandwagon such as India, Brazil and others) and not based on fundamental global growth.  In fact, as seen this past week, country after country is lowering growth forecasts, China the most notable now predicting sub 8% growth, and the U.S. is next (GDP release is 3/29/12).  The SPX poked up thru the closing highs from days earlier but could not print a higher high than the prior intraday high at 1378, so far.

The 2011 closing and intraday highs, 1363.63 and 1370.58 continue to receive lots of testing. Mid-week the SPX opened exactly at the 1363.63 and Friday's close is at the intraday 2011 high. Note how the 10-day MA provided a cushion of support for price on Friday. The SPX has come up to the highs from a few days ago with the daily chart showing wicked negative divergence.  Price can move up a day or so more but the divergence is so drastic, price should receive another slapdown at anytime, just like days ago.

The SPX starts the new week at 1371, providing the bulls and the bears an equal chance of seizing control come Monday. If the bulls can touch the 1375 handle, the broad indexes will take another leg up, the test of the prior intraday high at 1378.04 would occur in short order, and perhaps lead to 1386.  The market bears need to lose the 1366 handle. If you see the 1365 handle start to print, then the broad markets will accelerate lower, the 10-day MA would fail, 1363.63 would fail, 1361 would try to support price but the big fight for support would occur at the 20-day MA. A move thru 1367-1373 is sideways action.

An interesting week is ahead since seasonality-wise it is typically a very bullish week, however, the charts are setting up very negatively indicating the next roll over is on tap.  Markets are continuing along with their topping behavior over the last three weeks. On Monday, root for SPX 1375 if bullish, or, SPX 1366 if bearish.

·        1407

·        1404

·        1399

·        1391

·        1389

·        1386

·        1378 (2/29/12 Intraday HOD for 2012: 1378.04)

·        1376

·        1375

·        Friday’s HOD 1374.76

·        (3/1/12 Closing High for 2012: 1374.09)

·        1372

·        1371

·        Friday’s Close 1370.87

·        1370 (5/2/11 Intraday HOD for 2011: 1370.58)

·        1368

·        1366

·        Friday’s LOD 1365.97

·        10-day MA 1364.63

·        (4/29/11 Closing High for 2011: 1363.61)

·        1363

·        1361

·        20-day MA 1360.14

·        1358

·        1356

·        1351

·        1347

·        1345

·        1344

·        1341

·        1339

·        1338

·        1337

·        1336

·        1333

·        1332

·        1331

·        1330

·        1329

·        1327

·        1326

·        1323

·        1322