Saturday, April 28, 2012

SPX S/R Week of 4/30/12

SPX support, resistance and moving averages are highlighted below.  Last week saw a fakeout market downside move on Monday that gave way to higher markets as the week progresse, the Apple Rally.  As price moved upwards thru the week, the moving average levels below were all taken out.  The moving averages are developing a sideways texture which hints that price would also prefer to move more sideways going forward.  The confluence of the moving averages and support levels provides a strong gauntlet of support for the SPX at 1383-1387.

The SPX closed above 1400 for the first time since the first couple days of April.  Monday is the last day of April, EOM, so the monthly charts will provide a new data point.  The SPX started April at 1408.47 and now, at 1403.36, remains about five points under. Thus, the bulls need five or move points in the Monday session to provide a positive month, otherwise, the SPX will close with the first negative month since November 2011, five months ago.

For Monday, starting at 1403, critical sturdy support, the bulls need three or four green points to touch the 1407 handle, if so, the upside will accelerate strongly. The 1408.47 will then likely give way and the month of April will head for a positive close. The strong R at 1413 would become the next target. The wine will flow like water and bulls will be celebrating a market that simply does not want to go down, throwing confetti and dancing drunkenly, completely complacent, and now believing that markets will never go down (therefore, contrarian thinking may be handy moving forward).

For the market bears, the 1406 print must be prevented at all costs to stop the upward market momo.  In addition, stopping the upward momo is key since that would end the month of April as a negative month and allow the bears to beat their chests in victory. The bears need to push the SPX under 1397 during Monday, however, to ignite strong downward pressure. If 1397 fails, a test of 1391 would likely occur in short order. A move thru 1398-1405 on Monday is sideways action.

Copper jumped higher at the end of last week providing more bull fuel. Semiconductors attempted a run higher but petered out.  The bulls need the semi's, SOX, to cooperate otherwise the market upside will not have legs. The bears need to spank copper back down to restart the market negativity.  Therefore, the dollar is important come Monday morning.  A higher dollar means lower copper and commodities favoring market bears; a lower dollar means higher commodities and copper favoring market bulls.


·         1425 (Gap Fill from 2008)
·         1424
·         1422 (4/2/12 Intraday HOD for 2012: 1422.38)
·         1419 (4/2/12 Closing High for 2012: 1419.04)
·         1417
·         1413
·         1410
·         April Starting Number for the Month is 1408.47; Monday is EOM
·         1408
·         Friday HOD 1406.64
·         1406 (5/29/08 HOD)
·         1404
·         Friday Close 1403.36 – Monday Begins Here
·         1403
·         1399
·         Friday LOD 1397.31
·         1397
·         1394
·         1391
·         1389
·         1388
·         1387
·         20-day MA 1386.96
·         1385
·         10-day MA 1383.39
·         50-day MA 1383.35
·         1378
·         1375
·         1372
·         1371(5/2/11 Intraday HOD for 2011: 1370.58)
·         1370
·         1366
·         1364 (4/29/11 Closing High for 2011: 1363.61)
·         1363

3 comments:

  1. KS, do you feel a bad jobs report Friday (because of recently poor numbers in jobless claims) and a Hollande election victory in France (since he's leading in the polls) is priced into the market? This market needs a surprise shock event to trigger a waterfall crash. Otherwise, I think it's just one step back and two steps forward because of all the QEs going around.

    Steve

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  2. KS, one more question regarding H&S tops on stock charts. You posted sometime ago that the RUT had reach a H&S top. How far would the RUT have to gap up to invalidate that analysis? Does it have to go pass one of the shoulders or go pass the head top? Thanks for all your great work here KS.

    Steve

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  3. Hello Steve, there are a lot of plates spinning in the markets these days. For the Friday jobs report, it already appears that the number is expected to be weak, based on the weak Jobless Claims over the last month, so much of this will probably be priced in by the time the number hits so even a weak number should not hurt markets and a good number will probably rally markets.

    The France election seems to be priced into markets as well but the election results, probably announced next Sunday evening, will have a finality to them, so the futures markets should react, but perhaps not too drastically.

    The Greece elections are important next Sunday since more decisions are needed on austerity and this may be the surprising news next weekend. The big push higher in utilties is very bullish and if the utes remain elevated, any market sell off will be short-lived and reslult in a recovery. Also, copper moving higher last week is bullish as well. The Apple Rally from Tuesday evening on saved the markets since they were in trouble last Monday.

    Thus, if bearish, you want to see semiconductors stay weak and become weaker, and for the dollar to strengthen to hurt commodities and copper, which will take markets lower. The prior top took the SPX up near 1425 but price never filled the gap, it fell two points shy, so that gap fill remains on the table for some day forward.

    You are correct about the H&S patterns, if price does move higher than the 850-ish from late March, that would negate the H&S but the new high print that occurs can serve as a new head moving forward. There is a large gap for RUT at 830 only a half dozen points away which would satisfy the upside gap fills needed. So the H&S for RUT is clearly in place, head at 850-ish, neckline at 785-ish, difference of 65, so 785-65 targets 720, 710 is sturdy support. Call it a 710-720 target. The trigger for H&S patterns is when price breaks the neckline, this confirms that the lower target is now in play, and this is the 785-ish. Typically price will fall thru a neck line, then back kiss to the neck line, then fail traveling towards the lower target.

    Thus, considering the gap above on the daily chart, perhaps RUT would move from 825 now to 830 gap fill, down to neckline rupture at 785-ish. Lots of activity should occur around the 50-day MA at 817.39 this week.

    The broad indexes continue along in a rolling top type move snce February. Just have to take it day to day. Watch the sectors listed above. A catalyst out of left field would affect markets, such as Japan receiving a downgrade that would probably crush global markets, but, by the same token China may cut triple R's which is QE and that would bounce commodities, copper and markets.

    The utes moving up is a huge feather in the bulls cap, watch this week, since several utilities report earnings, to see if UTIL pulls back down, or not. Bears will be happy to see utes weaken again, bulls will be very happy to see utes move sideways or up.

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