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S&P Seatbelts

05/10/10 09:33:31 AM
by Austin Passamonte

Here's a market analysis for the Standard & Poor's 500.

Security:   SPX
Position:   N/A

US stock markets have covered plenty of ground since May 2008. That month's index high was SPX 1440 on May 19. In the 24 months since, price has fallen to lows of 666 in March 2009 and rallied back in grinding fashion to recent highs of 1219.

Graphic provided by: TradeStation.
In the grinding rally of the past year, as price walked straight up the chart in this daily bar's view, volume and volatility dwindled away. From the second half of April through the first few sessions in May 2010, price formed an apex wedge (as shown in Figure 1) as the second part of a diamond pattern (not shown) when intraday ranges began expanding. This pattern of instability warns of powerful breaks to come. And indeed the pending break was — including the largest intraday range for the S&P 500 in two years.

SPX index has retraced all of its upward progress since February 2010 and is right back to the starting point of September–October 2008. In other words, everything and anything that happened inside the markets since then meant nothing at all to where it rests today.

Graphic provided by: TradeStation.
Dialing out to the weekly chart view (Figure 2), S&P 500 is resting on clustered horizontal support dating back to the crash of 2008. This appears to be the last port of call for northbound ships before they sail off the edges of a flat Earth. Long-term vertical trendlines dating back to Mar 2009 lows have both been breached on a weekly close basis. Unless the index bases right here and musters the energy to clamber back above those lines overhead, SPX 1000 and lower are most probable.

Nil volume markets always go up like feathers and come right back down like lead balloons, just another case in point this time around in the US stock indexes. Lines in the sand are clearly drawn from price point to price point for all to see. Fasten your seatbelts, and prepare for the potential of a wild summer's ride.

Austin Passamonte

Austin is a private trader who trades emini stock index futures intraday. He currently trades various futures markets from home in addition to managing a trader's educational forum

Title: Individual Trader
Address: PO Box 633
Naples, NY 14512
E-mail address:

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