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S&P 500: A Pause That Refreshes, Or Is The Top In?

Tyler Durden's picture




 

Submitted by Charles Hugh-Smith of OfTwoMinds blog,

The current rally has reached extremes: more than three years above the neutral line of MACD and almost 500 points above the 200-week moving average.

U.S stocks have been treading water for a while, and this raises a question: is this just another pause that refreshes a market on its way to new highs, or is the top in? Nobody knows, of course, but a chart of the S&P 500 (SPX) that includes the previous tops in 2000 and 2008 offers some useful context.

I've marked three items of interest: the length of time the SPX spent above the zero line of MACD, the point spread from the 200-week moving average (MA) to the peak, and the longer-term trend in RSI (relative strength).

The current rally has spend more than three years above the neutral line of MACD, i.e. in bullish territory. The only comparable length of time without a dip below the zero line of MACD (which reflects a significant correction) was the Great Bull Market of 1995-2000, which was interrupted briefly by the Asian Contagion in 1998.

According to CNBC, the current rally has run more than 1,370 days without a 10% correction, making it the 3rd-longest Bull Market in history.

The SPX could drop 150 points (roughly 7%) and still be about 350 points above its 200-week MA--the same extreme reached in the blow-off top of 2000.

In terms of points above the 200-week moving average at peaks, the current rally has blown past previous bullish extremes. In round numbers, the current rally is very nearly 500 points above the 200-week MA, far exceeding the point spread reached at previous tops: about 350 in 2000, and around 250 in 2007-08.

The third item of interest is the declining trend of RSI. RSI bounces around quite a bit on this time-frame, but it is noteworthy that similar downtrends did not correspond to bull market advances. Rather, they align with market tops followed by declines.

Maybe the SPX will noodle around for some time in a pause that refreshes the Bulls, or maybe it continues tracing out a top. Either way, the extremes in time duration and points above the 200-week MA are noteworthy. Can this 6-year rally extend even further above previous extremes? if so, for how long? Or is the market due for trip below the zero line of MACD, or perhaps a visit to the 200-week MA around 1,630?

A 480-point drop is currently deemed impossible; but then 480-point declines are always "impossible," yet they happen despite this presumed impossibility.

 

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Mon, 05/11/2015 - 09:06 | 6080548 This is it
This is it's picture

As always...BTFTop!!

Mon, 05/11/2015 - 09:56 | 6080686 DeadFred
DeadFred's picture

A 38% retrace of the climb from 666 is lower than the 200 wma so why would it stop there? Once grvity takes over where it stops will be hard to say. I'm betting on a 50% retrace just because, just because I can say whatever I want. Don't bet on my TA predictions.

Mon, 05/11/2015 - 11:17 | 6080967 Hype Alert
Hype Alert's picture

They say don't fight the Fed.  The Fed said markets are valued 'quite high' and wants to normalize rates.  Is the market trying to fight the Fed?  Does the Fed have a choice with the corner they are in?

Mon, 05/11/2015 - 09:08 | 6080553 arvesia
arvesia's picture

ignore gravity they said

Mon, 05/11/2015 - 09:09 | 6080555 Newsboy
Newsboy's picture

"Inconceivable!"

Mon, 05/11/2015 - 09:13 | 6080563 yogibear
yogibear's picture

Wall Street and the Fed will take this market higher until all retail is in. However long that takes.

All about the transfer of wealth.

Mon, 05/11/2015 - 09:16 | 6080564 Oh regional Indian
Oh regional Indian's picture

Interesting, the broader Indian index fell almost 800 points last Friday, there were a couple of HFT whispers and then everything was quiet. BAck up almost 400 points today.

All is well. All is swell.

Frigging controllers, through econometric models the know the impact every point swing on the public mood.

Don't get me wrong, I really appreciate the fact this farce of a market gave us ZH, this community and some of the best headlines ever. Doesn't change the fact we have essentially discussed a giant farce for close to 6 years now.

Oh and an Indian named head of BRICS bank, total insider man.

Game on...

Sequence 19...

https://www.youtube.com/watch?v=wzESrhRrkTI

Mon, 05/11/2015 - 09:43 | 6080651 TheFourthStoog-ing
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Are y'all ready for another week of all-things-gold sinking like a stone and stocks going to the moon?

Me too!

Mon, 05/11/2015 - 09:50 | 6080671 Oh regional Indian
Oh regional Indian's picture

I'm ready to go all in to silver again.

Last time I did that, it worked out really really well for me.

It is that time again....By the kilogram my brothers...buy the kilogram....

When the Sun sets, the moon rises...

old made up saying... ;-)

Mon, 05/11/2015 - 09:17 | 6080566 rsnoble
rsnoble's picture

If anyone can't look at the that S&P 20 year chart and see the BIGGEST BULLSHIT RAMP OF ALL TIME---you are a fucking idiot.

This overpriced fraud of a market should've rolled over a very, very long time ago.  

That chart screams DESPERATION. 

If it does blow up....it will spew pieces of shit all over the known universe.  Anyone that has kept up with what's going on in the world, the economy, etc. and has chart knowlege, can just take one glance at that chart and tremble in fear knowing what kind of extremes they've gone to and what the repercussions are going to be.

Mon, 05/11/2015 - 09:46 | 6080659 DavidC
DavidC's picture

100% spot on.

And the US opening today seems to confirm that.

DavidC

Mon, 05/11/2015 - 10:42 | 6080833 Nage42
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The concern is, if you bet on a collapse you can never claim your "winnings."

 

The people vested in the current power structure have gone all-in, and they not only have everything to lose, but they also control the armies...  So they will not let it fail at "all costs," by the way, they're using your money, so that all costs will be funded by you.

The only alternative to persisting the game is to let it fail, which means that the whole market goes kaput, and you cannot collect the winnings on your bet that it would fail... this is precisely because when something is persiste this far into untruth, it doesn't just "correct, and then recover..." nope, it goes well Tango-Uniform into clusterfsck-supernova (read: "Global civil war" which means that every single country is in civil war with itself, not its externalized demons).

So, you're either all-in too, or you've gone full off-the-grid-tinfoil-hat, those are the only two rational bets.

I've taken an irrational bet of 1/3 in, 1/3 PMs and global diversification, and 1/3rd enjoy my life as much as possible right now cause there's NO WAY we will have these kinds of freedoms and capabilities in 10 years... just no way...  which is sad... but there you go.

 

Mon, 05/11/2015 - 11:40 | 6081045 Baa baa
Baa baa's picture

I wouldn't write off freedom and liberty for Americans just yet. The world is stranger than I can believe and the most remarkable things do happen. A civil war in the US today will not be as pathetic as you imply. Americans have a history of finally getting around to business, usually after the threat has become imminent. Obviously a clear majority of Americans have yet to reach that point but it is comin' and it will not be at all what the Muslims and the rest of the nation haters have come to expect.

Tue, 05/12/2015 - 10:54 | 6084956 Nage42
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I believe the sentiment was:

"Americans can always be trusted to do the right thing... after they have exhaused every other alternative."

 - largely attributed to Churchill, but no evidence to this case... the quote I mean; the topic is ripe with evidence

Mon, 05/11/2015 - 09:14 | 6080567 ebworthen
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Free money!  And we're all going to live forever!

Mon, 05/11/2015 - 09:21 | 6080589 Ban KKiller
Ban KKiller's picture

Comedy rules! Accounting is...........DEAD.  At least any meaningful accounting, aka, truth. 

Mon, 05/11/2015 - 09:22 | 6080591 fremannx
fremannx's picture

This analysis of the Dow applies as well to the S&P 500. Under this scenario, both indexes will move slightly higher before being swallowed by the deflationary vortex.

http://www.globaldeflationnews.com/dow-jones-industrial-averageelliott-w...

 

Mon, 05/11/2015 - 09:23 | 6080597 buzzsaw99
buzzsaw99's picture

there will always be an opportunity to pay MOAR

Mon, 05/11/2015 - 09:25 | 6080604 Osmium
Osmium's picture

No way they will stop before DOW 20k

Mon, 05/11/2015 - 09:25 | 6080606 Fun Facts
Fun Facts's picture

The top is in only if the central banks, who now own 50% of global equities quit pressing the buy button.

Mon, 05/11/2015 - 09:38 | 6080637 yogibear
yogibear's picture

An ocean of Federal Reserve printed money. The only way this stops is when there's a currency crisis.

The Fed does 0% interest or negative and QE on-off-on until there is a currency crisis and all players realize the Federal Reserve is full of it.

Printathon until it goes bust.

Mon, 05/11/2015 - 09:40 | 6080642 Bryan
Bryan's picture

I don't know why you still want to assign 'normal' metrics to an abnormal "market". 

Mon, 05/11/2015 - 11:29 | 6081001 Baa baa
Baa baa's picture

So true, the fellow who earlier mentioned fundamentals as a guide caught me by surprise. Fundamentals in this day and age, with this market? Lemme know how it works out because I do not see any fundamentals operating on this equity market at all. Well, perhaps between HF trades, one could catch a glimpse. There is no truth.

Mon, 05/11/2015 - 09:41 | 6080644 TheFourthStoog-ing
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Zero Hedge has been calling the top for 5 years.

Prescient or dumber than a box of rocks? Hmm....

Mon, 05/11/2015 - 10:39 | 6080822 mastersnark
mastersnark's picture

Well, this time it's different

Mon, 05/11/2015 - 09:43 | 6080648 Quinvarius
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It is possible for the Fed and Treasury to put any price they want on any screen.  There is nothing that will overcome them.  What they cannot control is the incredible amount of damage that is done to the real economy in the process.  The lifeboats will disappear first.  Then the consumer goods will follow.

Mon, 05/11/2015 - 09:45 | 6080657 MajorFall
MajorFall's picture

Because... its different this time!

Mon, 05/11/2015 - 10:26 | 6080768 FranSix
FranSix's picture

I'm going to say something that sounds a little negative. Do you think Apple is a fraud? Remember MCIWorldcom and Enron.

Mon, 05/11/2015 - 10:43 | 6080835 mastersnark
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I'd be worried if I cared about technical analysis, but I only focus on the fundamentals, and with SP forward P/Es well below 50, things are still cheap compared to the Netherlands in 1637.

Mon, 05/11/2015 - 11:00 | 6080899 Big Cox
Big Cox's picture

Plunge Protection Teams… roll out!

Do NOT follow this link or you will be banned from the site!