Wednesday, September 05, 2007

S&P 500 Index In An Uptrend?

They say a picture is worth a thousand words. The question is which picture is the correct one. From a technical perspective, the two charts below depict the S&P 500 Index with different reference points for the trend lines.

In the first chart, it appears the S&P Index may be breaking out of a short term downtrend. In the second chart, the downtrend remains firmly in tact. In both charts, two points should be considered:
  • the recent rally has been occurring on lower volume.
  • the S&P close today was below the 50-day moving average.
(click on charts for larger image)

s&p 500 index chart September 5, 2007
s&p 500 Index chart. September 5, 2007. Longer technical lines.
It appears the stock market is trying to establish an uptrend, but the lower volume and the inability of the index to hold the 50-day moving average resistance line is one indication the market (i.e., investors) is not firm in another leg up at the moment. If the market could establish several closes above the 50-day moving average, this could be a positive technical sign for the market.

As noted in one of my prior posts, Patience is a Virtue at this Point in the Cycle, there are a number issues the market needs to digest over the course of the next month or so that could determine the future direction of this market.

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