Wednesday, March 4, 2009

Zignals Stock Chart: S&P/SPY trading relative to the November bottom

In relative terms to its 20-day, 50-day and 200-day MAs the S&P is knocking around the same zone as it was on November 19th and 21st 2008; back then the S&P was 35.5% and 35.7% away from its 200-day MA; 20.6% and 19.8% from its 50-day MA; and 11.1% and 10.8% from its 20-day MA repsectively. As of yesterday the S&P was 35.1% from its 200-day MA, 17.0% from its 50-day MA and 12.3% from its 20-day MA. Outside of this the closest we have come in recent history (back to 1950 at least) is October 1974. Back then the S&P only diverged 28.4% from its 200-day MA. So we are looking at a whole new ballgame.

In SPY terms we could see a capitulation over the next couple of days.

It looks like a capitulation is needed to spike volume into fear selling, something which has been relatively lacking since the start of the year (especially when compared to the volumes of September through to November). Bottoms can come in on a whimper but volatility would have to drop off considerably for it to happen and this seems unlikely.

I have entered a YourCall for a push to $84.39 but have run a tight stop on the 2-day low. If the index gaps down then it could fall far (and fast), so not looking to pick a bottom.

Dr. Declan Fallon, Senior Market Technician, the free stock alerts, market alerts, and stock charts website