Support and resistance plus market internals technical analysis for the S&P 500 index' next moves: Turning Points update by Andre Gratian

Technical analysis can give great insight into the health of a market and the probabilities for its next moves. Here's Andre Gratian's weekend report with his technical analysis of the S&P 500 (SPX), sometimes looking at related markets like the Nasdaq (QQQQ) and the dollar. He takes an objective approach using classic technical analysis together with cycles, Fibonacci work and some thoughts about wave counts, in his Turning Points reports. Andre's website is at Market Turning Points (always included in the sites list at right side of the page here). He provides his weekend updates also to his subscribers, and on occasion at Safe Haven as well. And of course his intraday updates and comments to his subscribers.

Here's what Andre is sharing this weekend.

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May 2, 2010
Week-end Report
Turning Points
By Andre Gratian

Before we look at charts, let’s assess and re-assess the various market trends.

Long term: Up until at least 2011.

Intermediate term: Up, topping.

Short term: Correcting, trying to find a low prior to another rally.

Near term: Could have made a low on Friday. Rally may not be enough to turn the short-term trend.

Now, we can look at the charts to confirm the various trend positions described above. We’ll start with the Monthly chart, on the left, below.

There is no sign of weakness in the long term and only a correction seems probable in the next few months. I have made a rough outline of what I think the path of the index will be in the future.


On the right, the Weekly chart. After a long spell of bullishness, it is finally beginning to show early signs of a top. All the indicators are showing negative divergence. We could still trade in this general area for about another 3 weeks before rolling over.

The Daily chart gives us a better feel for the intermediate topping process. By channeling, we can separate the various trends and see more clearly the process of deceleration which is taking place.

The index is already trading outside of its steepest channel, which is outlined with the thin black lines.

It will give a sell signal when it moves out of the next channel, outlined in brown. But even that may only be a preliminary sell signal. For confirmation it would have to start trading outside the blue channel. That is the one which represents the trend from the March 2009 low.


At present, it does not seem likely to do either. The indicators gave a short-term sell signal at the last top, but the middle indicator is now oversold and very close to being in a reversal position. The fact that it needs a little more work indicates that the index should go either sideways or a little lower over the next 2 or 3 days before it starts another rally. Currently, price has found support on the 34-dma and is coming back down to test it again. Even if it breaks it, it will get even more support from the combined 50-dma and the brown channel’s lower trend line.

The Hourly chart has a bit of a bearish slant. It is in a pattern of a lower low followed by a lower high since the 1220 top was made. If it can’t rise above Thursday’s high of 1209, there is a good chance of continuing the declining pattern.

It looks as if this will be tested on Monday. It’s a good possibility that the S&P will open higher. It closed on good support, concluding a 5-wave decline and, in spite of Friday’s weakness, after hours trading did not show a continuation of the trend.

If the index is to get back in an uptrend, it will have to move out of the wide channel in which it finds itself.

The upper channel trend line is currently at about 1209, so it would have to rise beyond Thursday’s high to avoid a continuation of the downtrend. If it can’t and breaks below 1281, it stands a good chance of dropping to 1176 before steadying itself.


The indicators turned down with Friday’s decline. The first to turn is always the middle one which is closely followed by the lower one. The pattern that both are making is not conducive to a strong up-move, so even if we find a low on Monday morning, it looks like more preparation will be necessary for the hourly prices before we can start a rally. There is, however, a positive sign. Positive divergence formed on the A/D oscillator (bottom) when it rose above its previous high, while the price index made a lower high. This could indicate that either we are ready to continue the uptrend, or a fairly mild additional consolidation lies ahead. The same thing happened on 4/20 and it was followed by a higher high. Is this a clue that we could get up to the 1215 projection after all?

Andre