SPX Weekly Chart QE1 and QE2 Rallies

Chart shows the affects of QE1 (quantitiative easing), the blue lines, that placed the March 2009 and started the rally into last summer, and, QE2, the red lines, that started with Chairman Bernanke's announcement during Jackson Hole in August 2010. The 200 week MA stopped and topped the QE1 rally. Interestingly, this 200 week MA was tested as QE2 ran, and it was broke to the upside showing that QE 2 had some room to run higher. The markets enjoyed that run until the April-May 2011 top. That 200 week MA at 1158 will serve as support as the index drops.

QE1 ran from 670 to 1250, say 600 points, and then gave back over 200 points. QE2 ran from 1050 to 1370, say 300 points, and now has given back almost 200 points. The move up for QE2 was only half of QE1 yet the fall from the top is already nearly equal. If the trend continues a QE3 may only provide a 150 point pop in the future.

Each move took five characteristic waves on the way up to their respective tops. The move up for QE2 has now retraced 50% of the move up. The SPX is now at levels experienced during the weak November 2010 period. A relief rally should occur but that 200 week MA above will serve as a magnet moving forward. The 20 MA remains above the 50 MA which keeps the bulls in the game, but, watch that potential cross closely moving forward as well. This information is for educational and entertainment purposes only. Do not invest based on anything you read or view here or any links connected to this information. Consult your financial advisor before making any investment decision.