S&P 500 in for a ride

October 14, 2014 06:29 AM

It is pretty clear that the sell-off in the S&P 500 (CME:SPZ14)is technically significant and a more extended selloff, larger than anything we have seen during the current bull market, is on the way.

The monthly chart formed a key reversal top in September and has violated the 10-period moving average (MA) this month, as well as the 10-day. That is the first time since June. At that time both the 20- and 10-day intersected at the same level on that chart so it ended up being support. You don’t have that setup this time. The 20-day MA. is much lower than the 10-day MA. The 10-day MA intersected at 1900.00 approximately. This failure suggests the market could head for the 20-day MA down at 1789.00 approximately. That alone suggests a more extended selloff unless the S&P 500 can do something quickly to recover. Also a buy triggered on the monthly chart just last month was already negated this month. The old rule is that if a market negates a signal that quickly, you usually see more follow through in the new direction.

But it has the other charts against it too. The weekly chart triggered a sell four weeks ago. It then failed both the 20-day and 10-day moving average three weeks ago. And this week it took out the low of the last selloff that bottomed in early August. That is the first time the S&P 500 has done that since the October 2011 low. That is not a good sign and technically can suggest a major trend change. And finally today the S&P 500 failed the 200-day MA on the daily chart.

There isn’t much good going on technically in this market. So where will it go? It has some support at 1850.00. But considering all the technical pressure going on no matter which chart you turn to, it could go to 1800.00. 



About the Author

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.