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Tuesday, November 8, 2011

Major indexes show improving technicals

All three of the major indexes are showing strong technical improvement, with the Dow forming a nice "W" pattern with a break-out above the top of that "W."  The S&P 500 i forming a "W" pattern right now, and looks to possibly break-out shortly.  The chart below shows that "W" for the S&P 500 (far right side of the chart), with tops right around the 1,260 level.  The 200-day moving average is at about 1,273.  If we break-out of this "W" we could certainly see a test of that 200-day and if we can get back above that level, it would be a huge positive for the markets.

Typically markets will stay above or below a 200-day moving average for long periods of time.  We broke down through the 200-day for the S&P 500 around the beginning of August and except for a recent, brief penetration, about a week ago, we have been stuck below it.  It can take a few tries before successfully surpassing the 200-day on the upside, but it appears that we are close to trading up into a higher range.  This would be welcome progress on the technical front, especially in light of all of the negativity in the markets we have endured of late.

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