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May 1st, 2010: Keeping It Simple

Posted by pugsma on May 1, 2010

5-2-10 (10:50am EST):  Here is the SP-500 weekly chart showing the past decade of price action and some key horizontal resistance and support levels.  Holding above the 1168 and then 1133 levels on any pull-back is a key for the bull case in the intermediate term.

SP-500 Weekly Chart (EOD 4-30-10):

1:50pm EST:  Here is the 13-day vs 34-day EMA chart I like to pull-out when the market enters a tipping point and the counts become a little less clear.  This is a daily chart of the SP-500 going back to the July 8th, 2009 low of 869.  On the chart I have the 13-day (green) vs 34-day (blue) EMA (Exponetial Moving Average) and the 200-day (red) SMA (Simple Moving Average).  One simple way of the trading the market is to go long when the 13-day EMA crosses the 34-day EMA.  On July 16th, 2009 there was a bull cross at a closing price of 941.  This bull cross stayed in affect until Jan 27th, 2010 where the 13-day EMA crossed back below the 34-day EMA with a closing price of 1097.  If you traded this way, you would have netted an impressive +16.9% gain on +159 SP-500 points.  There was a very near bear cross on Nov 5th, 2009 but the market turned around and the bull cross from July 16th, 2009 remained in affect through Jan 2010.  The latest bull cross happened on Mar 1st, 2010 at 1116 for the close.  So you would have gotten out at 1097 and back in at 1116, missing just 19 points but protecting your capital against a much better pontential drop that did not materialize as 1045 held support.  This bull cross is still in effect today with the SP-500 at 1186 close of Apr 30th, 2010.  Right now the 13-day EMA is at 1197.6 and has rolled over and is headed down.  The 34-day EMA is at 1182.5 and is flattening out.  So far the 34-day EMA has held the first two attempts to push lower.  The first two weeks of May will be critical to maintaining the bull cross.

Another feature to focus on with the chart are the paralle lines, in particular the upper green parallel line.  There have been 6 touches (1080, 1101, 1115, 1150, 1214, and 1220) on this upper line since July 2009.  The SP-500 has backed off rather aburptly after each touch.  So far this recent touch at 1214 and 1220 looks a lot like the Nov 2009 area around 1115, where a consolation triangle formed before the push to 1150 into Jan 2010.  Obviously, following reaction at the 1150 touch in mid January was very severe and produced a -105 point (-9.1% correction).  Next looking at the two mid-channel parallel white lines.  These white channel lines held support from Sept 09 to Jan 10.  I suspect that these white lines will provide some support, in particular the upper white channel line.  The 1150 Jan high could come into play at the second white mid-channel line.

Finally, my line in the sand for this P1 leg of the bull market to continue is 1112 (i.e the top of wave 1-[5]-P1).  A breach of this level and/or the lower green chanele line (which is paralleling the 200-day SMA at 1090 as of the close Apr 30th) would indicate that P1 is over and P2 has begun.  The 13-day EMA vs 34-day cross will likely be an early warning sign of this trend change.

SP-500 Daily 13 vs 34-day EMA (EOD 4-30-10):

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