The $SPX chart has turned bearish, with the breaking of the 1340 support level. However, it is oversold in that it is more than 4 standard deviations below its 20-day moving average, which is currently at about 1370.
Equity-only put-call ratios remain on sell signals, but they are so high on their charts that they are in an oversold state, too.
The breadth indicators have now reached extremely oversold levels, but they are also on sell signals.
The stock market has broken down through several support areas, to the point where it is now below the important support at 1,340 on the Standard & Poors 500 Index. This has turned the overall picture negative, but it has also created some extreme oversold conditions.
It is common knowledge that a bear market can continue to decline, even while oversold conditions exist. However, they eventually give rise to very sharp, but generally short-term rallies.
Following an overnight push to new lows, the market attempted to put together a rally into the 2pm EST Fed minutes. However, the market stalled and was unable to hold above the $SPX 1340, support-turned-resistance level. The bears have once again taken control of this market pushing it down to Tuesday’s lows. In the short-term, the market is very oversold and is due for a short-lived rally. If the bulls can somehow hold Tuesday’s low, I expect we will see a strong wave of short covering come into the market.
On Tuesday, May 1st, $SPX traded at 1415. Now, just 7 trading days later, the entire psyche of the market has become dark and brooding.
$SPX broke down through support at 1390 last Friday. But the crucial level is support at 1340, which has held so far.
Equity-only put-call ratios remain on sell signals. This has been the most bearish indicator all throughout this decline.
Breadth oscillators rolled over to sell signals on May 3rd -- a week ago. Since then they have moved into oversold territory.
Negative thinking has enveloped Wall Street in the last week. It’s rare to see to such obvious negative news reflect itself so directly in lower prices, but that’s what has happened in the last six trading days.
There has been a good deal of technical damage done in that short time, but oversold conditions are also emerging rapidly. Therefore there is still a chance that this is merely a correction in a bull market. Support levels are near at hand, though, and if they are broken, then a more significant bearish scenario could unfold.
Extremely heavy selling swamped the market in the early going on Tuesday. But at about 11:30am, a rally started that lasted most of the rest of the day. As a result, what might have been an extreme oversold day did not occur. Whether or not an extreme oversold day is required in order to put in a bottom, is unclear. But for now, the $SPX lows at 1347 are a support area, with support at 1340 below that. At least Tuesday’s lows took out the overnight lows from Sunday, so the day and night sessions are back in synch.
Earlier this week, a strong upside breakout was accompanied by generally positive technical indicators. But worries over the unemployment report have upset things somewhat. I'm not sure how the positive technicals got hijacked by the negative media and fundamentalist attitude about one economic number, but they did.
$SPX has pulled all the way back to the 1390 support level. There is resistance at 1415-1420 and support at 1358. The equity-only put-call ratios remain on sell signals. Breadth indicators have turned negative as well.
With last Thursday’s breakout to the upside by the Standard & Poors 500 Index over the 1,390 level, the technical indicators were mostly positive.
MORRISTOWN, N.J. (MarketWatch) — When the broad stock market, as measured by the Standard & Poor’s 500 Index, broke down through the important 1,390 support level in early April, it seemed that the bears would finally have their chance to take control after a long run by the bulls.
$SPX has essentially been trading sideways for about three weeks. The net result of this sideways action has been to relieve all of the overbought conditions that existed. Thus, the stage was set for another rally attempt if the bulls had the wherewithal to break out above 1390, a feat which they accomplished Thursday.
Market breadth has not been particularly strong until the last week or so. The breadth indicators are on buy signals.