SPX Daily Chart at 4-Year Highs Government Intervention Controls the Markets

The SPX closed at 4-year highs yesterday, levels not seen since May 2008, right before the market waterfall crash. The red circle is particularly interesting since it identifies 5/19/08 when the intraday high was 1440.24 and closing high was 1426.63. The SPX closed at 1432.12 on 9/6/12 supassing the closing high, but interestingly, did not yet close above the intraday high. The 1440.24 number takes on uber importance moving forward. Market bulls want to see a close above 1440.24 to indicate that the rally has sustainable legs higher. Bears want to prevent 1440.24 with all their might. On 8/21/12, only three weeks ago, price printed 1426.68 on an intraday basis, five pennies higher than the closing high from 5/19/08. That provided a hint that these 5/19/08 levels would be further explored

The pink boxes show how governmental intervention boosts the stock market. The Fed worries when price falls under the 200-day MA and their stimulus measures keep the SPX above this important moving average. The effects of quantitative easing are losing steam as time moves along. The easy money is not having the multiplying effect that would be expected if it was placed into the economy thru lending (velocity of money). The money sits at the banks since they are very picky on who they now lend to, while at the same time folks, and businesses, do not want loans since the economy remains on shaky footing.

The rally party continues but the rising wedge, overbot RSI and negative divergence (red lines) say that the band is playing the last set rather than setting up the equipment.  Stay alert and cautious in these markets moving forward.  The importance of 1440.24 cannot be understated. This information is for educational and entertainment purposes only.  Do not invest based on anything you read or view here.  Consult your financial advisor before making any investment decision.