Putting Chart reading skills to the S&P 500

Volume Analysis

When it comes to chart reading skills and Technical analysis skills, its best to keep things simple. And always include Volume analysis in your study. The S&P 500 is at an interesting point on Sept 18. After last week’s announcement of QE-ternity, markets have hit a 4-year high. Fundamental analysis tells us the market is overbought at this point. The economic recovery does not warrant this high a level. But let’s see what the S&P charts are telling us.

 

Figure I is a 6-month chart of the S&P Futures. A nice trend channel has been developing over the last 3 months. Thursday was the big announcement, and markets went up on very high buying volume. It broke through the trendline decisively but closed off the top.

 

 

 

 

On Friday we hit a 4 year high with the S&P 500 Futures touching 1468. But Friday’s price action deserves some study (Figure II below). The Volume was high, but the bar closes in the lower half. Now, Fridays are generally profit taking days especially after a big move up during the week. There was definite selling pressure towards the close on high volume. This was a bearish end to the week. Not surprisingly, this week has seen two down days.

 

 

 

 

The rest of the week should reveal which way the S&P wants to go. Its resting on its 5 day moving average and is very close to the trendline. Friday’s action is definitely bearish, but the trend is still upwards. If the 5-day moving average starts turning down (right now its still squarely pointing upwards), we may have seen a near term high at 1468. Let’s see how the rest of this week plays out.

1 Comment

  • Nrs

    Reply Reply November 23, 2012

    When I think of Amazon and Netflix trading at arunod 80 times earnings and then Apple at 19, I don’t think anything is wrong with Apple, other than the “big boys” driving the price down as they always seem to do a few weeks before earnings. A rumor here, a rumor there, and presto…you’ve got a much cheaper price to get back in. Right now, Apple is trading at the average multiple for the S&P 500, while growing earnings at the ridiculous rate of 80 percent.

Leave A Response

* Denotes Required Field