S&P500: need to see where it closes for the month.

January 13, 2016

There are a lot of dire predictions circulating about stocks with RBS, as an example, advising clients to sell all but quality bonds. Technical support is holding for now on the major US index of the S&P500 and, IMHO at least, I think it would be prudent to wait and see where this index closes for the month before making such a prediction.

S&P500 daily: price bounced up off weekly trend line support today. Any weekly break of this trend line and 1,900 level would have me looking for a test of the monthly support trend line:

S&Pdaily

S&P500 weekly: there is 1,900 and wedge trend line support that appear before the longer-term, monthly support trend line:

S&Pweekly

S&P500 monthly: a break of the monthly support trend line would have me looking for a test of the 1,600 region but this cannot be assessed until the January candle closes. The 1,600 level is the region of the earlier ascending triangle breakout and also happens to be the target for the Elliott Wave indicator.

S&Pmonthly

S&P500 70 year chart: Any break of the monthly trend line and pull back to test the 1,600 could end up being a case of history repeating itself. Note the last period of consolidation, green box in chart below, and how price tested the breakout region before bullish follow through. The recent consolidation period is shown in the blue box and corresponds to the period shown on my S&P500 monthly chart above. I’ve long been on the lookout for a test of this 1,600 region and thought it might never evolve. I’m back to wondering if we might see this yet. I’m keeping an open mind here for now:

S&P70yrLARGE

S&P500 Death Cross: there are still some similarities between the two Death Cross periods:

S&P500DeathCross

S&P500 & Ichimoku: price action is below the daily and weekly Ichimoku Cloud which is bearish:

S&P500weeklyCloud S&PdailyCloud

Russell 2000: this index is often likened to the ‘Canary in the Coal Mine’ for stocks and it is under pressure. Like the S&P500 though, there is monthly trend line support in play and traders really need to see where the monthly candle closes here, above or below this demarcation level, before making any conclusions.

RUTweekly

Summary: watch to see where the S&P500 and Russell 2000 close for January:

  • A close below their monthly support trend lines would suggest bearish follow through and, if so, I’d be looking for a test of the 1,6000 region on the S&P500.
  • A close above their monthly support trend lines would have to be read as bullish; for the time being at least.