Current S&P 500 selloff not same as others

Every time the S&P 500 (CME:SPU14) has had an extended selloff since early 2013, it reverses and makes new highs.

This process has established an obvious technical repeat on the charts, with one difference this time. 

On the daily and weekly charts these selloffs all end the same way. On the daily chart they dip under the 100-day moving average only to recover immediately and close back over it. The selloff ends and the S&P 500 then makes new all-time highs. Normally that technical violation should be negative but hasn’t phased the S&P at all, as is obvious. On Friday the most recent selloff again violated the 100-day MA (just like all the others times) but quickly recovered to close above it (just like all the other times). And is now attempting to rally further.

On the weekly chart, a similar pattern has persisted during selloffs. The recent selloff in the S&P 500 was no different. It violated the 20-week MA  on that chart, but it then formed a reversal bottom to close back over it. In fact it has completed selloffs this way five times in a row since early 2013. On the weekly chart the market bottomed in June and October 2013 this way. In 2014 it did so in February, April and now last week. And it correlates with the violation/recovery of the 100-day MA on the daily chart.

So where is the difference? In the monthly chart.

During all the selloffs outlined above, the monthly chart never showed any type of top formation. Not so this time. Unlike any of the other times, the monthly chart formed a key reversal top last month. So the selloff we just experienced on the daily and weekly charts, which is a carbon copy of previous selloffs technically, did not have this key reversal top to contend with. 

Will it make a difference? We don’t know yet how the market will deal with it but it warrants watching. But if that key reversal top on the monthly chart does become an issue and the market cannot establish a new contract high because of it, the s&p may finally be able to establish the overdue major correction everyone keeps talking about.

 

 

Ed Note: Every day traders can listen to live, streaming squawk box commentary on FUTURESmag.com coming directly from the S&P trading pits in Chicago.

About the Author
Judy Crawford

Judy Crawford is a senior broker at Zaner Group. Raised in rural Minnesota, Judy went to the University of Minnesota and received a BA Degree in language. She specializes in technical analysis of the markets and write a market commentary entitled “Market Update” that is available to readers via e-mail. Sign up at her website: www.tradingfuturesmarkets.com. If you would like to receive a free trial subscription to my Market Update that reviews all the markets and along with trade suggestions, register on my website: www.tradingfuturesmarkets.com.

 

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