S&P 500 Indicates Market Stalling

The long term signal (green line) is indicating market top approaching.

Markets Are Waiting For Good or Bad News

I first want to apologize for not updating this blog since September 17th.  I have been very busy trying to repair one of our rental properties so that we can place it back on the market, and I have also suffered through two medical emergencies since the last post.  Despite FED manipulation the week prior to September 17th the markets finally signaled a close to the sell period at the beginning of October (Chart 1 below). Right now the market remains in a holding pattern waiting for a sign (good or bad). Lately we have seen some very low volume market swings over the last two weeks, but participation seems limited and the general consensus appears to be caution.  A movement of the intermediate sentiment signal (blue signal line in Chart 1) above the pink line will indicate a tentative buy signal, but for now the best thing to do is wait on the side lines for an opportunity. 

For now the "Super Signal" (Chart 2 below) is indicating that there is no immediate risk of market collapse.  Although it is currently trending lower and approaching the same level indicated as the 2008 signal formation as indicated by the pink dashed line.  For more information on the "Super Signal" visit my Super Signal Charts page.

The expected trading range for the week of November 26th, 2012 is +/- 2.04% or a low of 1,380 and a high of 1,438 for the S&P 500.  Also based on recent historical performance the expected trading range chart is indicating that we may be approaching a good buying opportunity as the weekly expected volatility increases and moves back above the average trading range (see Chart 3 below). 

Chart 1: 11/27/2012 S&P 500 Sentiment Signals

Chart 2: 11/27/2012 S&P 500 Super Signal

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Two Words: FED Manipulation

Last week we saw the FED promise to continue to manipulate the market until 2015.  $40 billion dollars per month.  History has proven that market manipulation has only ended in disaster.  I don't think disaster is around the corner for now, but I do think a market correction is long overdue.  Both charts below are indicating that correction is likely to come soon.  It would have come sooner without FED manipulation.  The long term sentiment, indicated by the green signal line in Chart 1 below, is about to cross below zero usually indicating the end of the sell period.  However, the slope of the intermediate signal line (blue) has turned positive.  This could extend the selling period beyond the long term sentiment going below zero (as it did in June 2011).  It all depends on how safe you want to be.

Chart 1: 09/17/2012 S&P 500 Sentiment Signal

The weekly S&P 500 expected trading range for the week of 9/17/2012 is +/- 1.95% or between 1437 and 1494. Futhermore, the expected trading range has dropped below the average trading range.  A move below the average (since 1952) has, in recent history, indicated a good period to sell (see Chart 2 below).  Could be indicating reduced volatility due to upper resistance.

Chart 2: S&P 500 Weekly Expected Trading Range 9/17/2012.

Selling Period Extended, but Near End

The market signaled entry into a "Tentative Sell" period, according to the S&P 500 Sentiment chart below, on June 13, 2012 and entered the confirmed "Sell Period" on July 18th.  In my last post on July 15th, I stated based on the trend of the long term signal that the "Sell Period" should end around August 15, 2012.  The signal stayed on track until just prior to August 15th when the long term signal leveled out and has remained on that trajectory for some time.  I have been too busy to post since July 15th, completing rental property repairs,  and I apologize for not posting sooner if anyone was interested in this information.  However, it appears clear to me that the trend of the long-term signal is likely to continue to go lower and follow the intermediate signal trend.  I believe we will see a retracement to around the 200 day simple moving average or 1356 as fears settle in that there is little gain left in the market for the rest of the year and that  promises of near future stimulus are empty.

Image 1: 08/27/2012 S&P 500 Market Sentiment Chart

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