Loading ...Technical Analysis Summary of S&P 500
This is my standard intro to technical analysis – you can skip down to the table (or click “continue reading”) if you read this feature regularly:
Many people who trade in the markets believe that there are patterns that can generally lead to profitable trades. By analyzing stock charts that show the change in price along with the volume (how many shares were traded), “technical analysts” believe they have an edge and can time their trades profitably. There is significant controversy over this subject, however. Others say that, unless you have some information that no one else does, basically you can never beat “the market” because everything is already baked into the current price of a stock.
Nevertheless, supporters of “technical analysis” are everywhere, and the tools for their trade can be found throughout bookstores and the Internet. I like to follow some websites that do some of the work automatically and provide a snapshot opinion of whether a particular stock is considered “bullish” (going to go up in price), “bearish” (going to go down in price) or “neutral” (stay about the same price).
For simplicity, I’d like to start by showing you a snapshot of what several technical analysis websites suggest about the exchange traded fund (ETF) with the ticker symbol of SPY. This fund is supposed to go up and down the same as the S&P 500 index does. And many people consider the S&P 500 index (a measure of the price of the 500 largest companies that trade in the U.S.) to be an accurate gauge of where “the market” stands.
For each of the sources below, where I have a choice, I will use a measure that attempts to predict the future direction of SPY or S&P 500 in the next 3 months.
Source: Barchart.com | BULLISH
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Quick ‘n Easy Barchart.com says that SPY is positioned to rise over the next three months. Two of the three signals are strengthening. For the most part, this analysis is reasonably certain that SPY is bullish right now. |
Source: BarChart.com
Easy Notes: BarChart.com says that SPY is positioned to rise over the next three months. Although all three signals are “buy” right now, one of the three signals is “weak” and moving toward the wrong direction, which means the signal may turn to “hold” soon . That signal (50-100 Day MACD Oscillator) unfortunately happens to be the one that has been the best predictor over the past several years. But overall it’s a bullish assessment.
This is the seventh consecutive “bullish” assessment. This week, two of the indicators are headed in a more bullish direction (“Strengthening” means the signal is getting stronger in the direction it is pointed).
According to this site’s analysis, the current price of SPY is 73 percent of the way between “support” to “resistance.” (see below for definitions) Thus, it will be slightly more difficult to see significant upward price movement.
Additional Info
Support - a price where recent patterns have indicated that buyers will probably be more motivated than sellers, and so the price will likely not below that level.
Resistance - opposite of support – a price where sellers will likely be more motivated than buyers, and so the price will have a hard time rising above that level.
Source: CXOAdvisory.com | NEUTRAL
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Quick ‘n Easy CXO Advisory Group uses technical analysis to project the earnings from the S&P 500 companies as well as the expected inflation rate. Using these two estimates, it provides a projection out to three months of the S&P 500 index. It is projecting a 0-1% rise by the end of March 2012. |
Source: CXOAdvisory.com
Easy Notes: CXO Advisory Group uses technical analysis to project the earnings from the S&P 500 companies as well as the expected inflation rate. Using these two estimates, it provides a projection out to about three months of the S&P 500 index.
The two most reliable models (REY-M and REY-L) for projecting 3-month movements project a 0-1% gain from the current level by the end of March 2012. That is a stronger-than-average pace of growth.
Additional Info
Why does this source sometimes go against what the other ones on this list are saying? It’s because this model assumes that stocks should be valued at a certain price based on their estimated future earnings and the rate of inflation. Wherever the current price is relative to that projected price is the amount it expects prices to change. So, if stocks take a tumble, it just means they have that much higher left to go to reach the targets that CXO believes they will attain. In contrast, when stocks rally strongly, it lowers the amount left to rally for the rest of the three month period.
Source: StockTA.com | NEUTRAL
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Quick ‘n Easy StockTA.com analyzes numerous different technical indicators and combines them into a composite rating for either short, intermediate or long term. We are focusing on the long-term, and right now it says that SPY (which tracks the S&P 500) has “neutral” prospects. Expect SPY to stay about the same in price over the next three months. |
Source: StockTA.com
Easy Notes: StockTA.com analyzes numerous different technical indicators and combines them into a composite rating for either short (30 days), intermediate (60 days) or long term (120 days). We are focusing on the long-term so it is as close to 3 months as possible.
The long-term rating stays at “neutral” this week for the tenth consecutive time. There are two “very bearish” indicators for long-term. One has to do with the volume at which SPY has been re-visiting high points. You want to see a stock hit high points with higher volume on the way up than on the way down, but the analysis suggests the opposite for SPY. The other is called “MACD” and looks at different lengths of moving averages. There is one “very bullish” component, which is the exponential moving average (EMA) analysis, which is a measure of the momentum of the price.
According to this site, the current price of SPY is about 0.6 percent higher than “support” – and there appears to be no “resistance” point defined above. (see below for definitions) This means it is somewhat more difficult to see any significant downward price movement. It should be easier for the price go up.
Additional Info
Support - a price where recent patterns have indicated that buyers will probably be more motivated than sellers, and so the price will likely not below that level.
Resistance - opposite of support – a price where sellers will likely be more motivated than buyers, and so the price will have a hard time rising above that level.
Source: Finviz.com | BULLISH
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Quick ‘n Easy The price of SPY (which tracks the S&P 500 index) stayed above the 200-day moving average – a bullish sign. Moving average is a good signal by which to judge the momentum of a stock’s price. |
Source: FinViz.com
Easy Notes: SPY closed 5.50% above its 200-day moving average (versus 3.33% above for last week), which is generally considered a good sign. Note the purple line that slopes downward to the right and the blue upward sloping line. These are formed from the high and low points of the price swings, respectively. When such a pattern emerges, it is often called a “pennant” because of the shape. Usually, when the pattern is broken, it results in a large move of the price. You can clearly see how SPY broke above the purple line and continued rising. This was essentially as expected. Once SPY starts to retreat, we may know more about a potential new pattern emerging.
Additional Info
Moving Average – take the average of the closing price (last price of the day) of the last “X” number of trading days. In this case, we used the last 200 trading days, which is a common time frame for analysis.
Easy Take
This week, the CXO Advisory rating was downgraded to “neutral” due to a low projected growth rate of the S&P 500. The two analyses that look at support and resistance disagree with one another. So, it’s unclear whether the price would more easily go up or down from here without any barriers in its way.
Out of the four sources I’ve mentioned, we have 2 bullish, 2 neutral and 0 bearish. If we were to average these using 3 points for “bullish”, 2 points for “neutral” and 1 point for “bearish,” we’d get an average of 2.50 out of 3 (versus 2.75 last week). If we split the interval between 1 and 3 (which are the minimum and maximum we could get as an average) into three equal parts, that means the following:
1-1.666 = Bearish
1.667-2.333 = Neutral
2.334-3 = Bullish
Right now, the several indicators I’ve chosen to follow suggest a bullish outlook for the S&P 500 and, most likely, the market in general for the next 3 months.
NOTE: The outlook shown above is based on what the sources themselves are predicting. I have been examining the relationship between my average weekly rating and what actually happens to the S&P 500 index over the subsequent 13 weeks. Based on that, I am now publishing an Easynomics forecast for where the S&P 500 will be in 13 weeks. That outlook may be very different from what it says above because it is based on the relationship between what the technical indicators say and what the end result has actually been.
NOTE: You may be reading an outdated article. Please visit my latest stock market technical analysis summary of the S&P 500 for more.
Related posts:
- Tech It Easy: Outlook Worsens Slightly – Market technical analysis summary (Oct 15, 2011)
- Technical Analysis Summary of S&P 500 – Tech It Easy: New Year Begins on Bullish Note (Jan 7, 2012)
- Technical Analysis Summary of S&P 500 – Tech It Easy: Almost Perfectly Bullish (Dec 10, 2011)
- Tech It Easy: Market technical analysis summary – Most Bullish So Far (Nov 5, 2011)
- Tech It Easy: Market technical analysis summary – 100 Percent Bullish For First Time (Nov 12, 2011)
