S&P 500 (SPX) - Calling it a Top

S&P 500 Index and global stocks as a whole have been enjoying quite a fancy rally for the last 6 months since the Lows of October 2011.

I could skip the fact that the rally since Dec 2011 is unfolding in a perfect 5 waves pattern. I'm much more interested in my favorite Bollinger Bands that are quite overstretched just like any other technical indicator, pointing to the unsustainable state of the trend at these heights.

Seems to me we are back into the good old days (2004-2007) when we had the Carry trading in FX and all the stocks markets were fostered by the steady selling of YEN for all other higher yielding currencies.

I might just call it a hunch but I'm rather sure we witness a good correction at these lofty levels.

S&P 500 (SPX) Index - Consolidation Range at the Top

SPX is trading inside the 1340 - 1360  consolidation Range after the reversal off the recent Top around 1377.

The SHORT Perspective::
The Upside is Capped by the 20-Day MA. I have 1325 and 1280 as immediate Targets of the current correction. All Technical Indicators are in Reversal mode and below 1340-1325 I'd expect an acceleration of the current corrective move.

The LONG Perspective::
The 20-Day MA at 1359 is the threshold - a Close above would signal price will need to touch the Upper BB at 1377. Still I'd view the current phase of the market as Horizontal consolidation and I'd expect the Bollinger Bands to show further contraction as the Distribution phase unwinds.

History repeats itself

If you ever wondered if it is true that History repeats itself, check this out:

On Oct 3, 2008, SPX closed at 1099.23.

On Oct 3, 2011, SPX closed at 1099.23.

Sell in May and Go Away?

S&P broke important support and technicals already signal a reversal - at least in the short term. A move below the 50-Day MA will accelerate the move.

Silver is breaking painfully down towards the important area of support around 30-34 levels.

Looks like a bubble unwinding but let's see what the end of QE2 brings as inflation is still not on the radar of CBers.

As indicated in the previous Global Macro update, Copper is moving toward 408-410 area which is a 'make or break level'. Below it the 200-Day MA will hold the move, however we might see a major exodus out of commodities once a snowball effect takes place as too many players jumped on the bandwagon of the inflation theme and maybe overstayed their welcome. Let's see how Copper will trade at the 400 level.

QE2 seems to come to an end and yet again deflationary fears are rising.

Rates are dipping down towards the 3.2% Support and if broken they will target again below 3%.

Are you ready for a bounce?

It is always important to wait for a confirmation and not jump in anticipation so I'm just making this observation that the trend is already overextended and technicals are in Oversold conditions for quite some time so a reversal is highly probable. When, how much, and whether it will be a Major reversal is to be seen.

Global Macro Update - Asset classes consolidate after the recent moves

10-Year USTs need to fill the Gap and break out of the current ranges to initiate a decisive trend. Until ranges hold I remain cautiously monitoring the price action ahead of the end oof QE2.

Copper is consolidating inside a tight range and looks like a Descending Triangle is in the making.

It is a bit early to call a breakdown, however if we see a close below 407, Copper should slide to the next support at ~360.

On the upside the Major trendline (RED) is the important Resistance guide to price action.

Gold seems weary of the slow grinding higher and at a trendline Resistance with technicals screaming for a pullback if not Reversal.

Silver produced a large DOJI. Could be a blow-off top of just a temporary indecision.

Next Support comes around 42 and then will see which one is the case.

S&P 500 coils higher on low volume.

USD is trending inside the down channel.

Compalcency rules the market.

The Teflon Market - S&P and the Sector Performance

The Teflon Market as they call it on CNBC shrugged off all the bad news from Middle East and Japan and is once again in Bull mode. SPX broke above the 55-Day MA targeting the 1335/4o recent highs. Technicals remain Bullish and trend looks constructive at this stage.

Small Caps represented by Russell 2000 are outperforming the S&P and looking for new highs.

Basic Materials remains in the best performing sectors list with Precious Metals leading the rally as Silver is on a strong Bull run with immediate targets above $40.

Energy Sector along with Crude Oil making new highs underpinned the strong performance of the S&P in the midst of the recent tensions. Oil & Gas companies seem to benefit from the rising Oil prices and the fears from the Nuclear power as Uranium stocks were hit extremely hard after the Japan Earthquake.

Financials are struggling and remain below the 55-Day MA. Housing sector problems and big number of mortgages still under water seem to be a drag on the balance sheets with slow credit growth doesn't help also.

Industrials are lagging the Materials and Energy but still perform in the top tier as economic recovery goes on.

Technology is having problems below the 55-Day MA for the moment as companies still withhold from spending.

Interesting enough the Consumer sector is a raging bull here but looking a bit tired as the trend is looking a bit flat even though we see a nice pull back after the Japan earthquake hit. The QE2 loose money policy should be benefiting the consumer while it is a bit confusing as the housing sector is struggling and mortgage payments are a drag on consumption for a large part of the lower income population until the unemployment falls to levels below 6-7%.

Utilities as a traditionally defensive sector are not in vogue and actually flat for the last 6 months.

Health Care is actually in a pretty healthy position. We should monitor the political decisions for further guidance in this sector.

US Sector Performance vs S&P 500 - Small & Mid Caps Outperformance

Small Caps (RUT) and Mid Caps (MID) Outperform the S&P 500.

IWM and MDY ETFs track best these cash indices.

Financials rallied off the lows in Dec 2010. Energy sector performed very strong in Q4.

Consumer Services and Basic Materials were the strong performers in 2010.

Health Care has been the weakest performing sector in 2010. Consumer Goods reversed their strength in Q4.

There was volatility in Q3 in Technology sector, however performance is overall flat for the 2010. Home Construction was a consistent Under-performing sector which bottomed out in Dec 2010.

Utilities as a defensive sector finished 2010 near the lows of the 2010 range. Industrials were a consistently outperforming sector and given the economic recovery builds momentum in 2011 they will continue to do well.

VIX near 1 year Lows - Warning of a pending trend reversals

Market extremes would favor taking the other side: Mainly going long Volatility and shorting the SPX. CBOE Put/Call Ratio is down however not at an extreme level so it might be giving a warning signal that the price moves hasn't run their courses just yet but it is time to stay alert of a trend reversal.

Commodity Groups & S&P Sector ETFs' Performance YTD

Agriculture has outperformed with 38% YTD and PMs are catching up with 29%.

Energy and Industrial Metals are performing rather bleak in the 8-10% brackets.

Best performing sectors have been the Consumer Discretionary (22%) and Industrials (14%).

Energy and Materials are in the lower 5-6% bracket.

Healthcare & Financials are struggling with 7-8% Negative performance.

Brazil, India & Turkey Stock Indices Trend updates

BOVESPA - H&S rolling down pattern points to a rotation below the 200-DMA.

India Nifty 50 Index has a Broadening Top pattern with broken base which points to a target at the 200-DMA.

Turkey 100 Index bearish breakdown of the supporting trendline targets the 200-Day MA.

All charts have oversold reading on the Momentum and RSI technical indicators which might point to a technical bounces however it still means that the prevalent trends are intact and they might accelerate further.

Stock Market Momentum is topping

My previous target 2950 on Shanghai Composite (http://constellation1976.blogspot.com/2010/10/shanghai-composite-momentum-persists.html) has been met and actually exceeded. Think momentum is Topping here and I expect a rise in Volatility.

S&P still manages to squeeze higher but Momentum is waning.

VIX is like we live in bliss and economy is alright. My assumption is hang there for a while and Volatility spikes higher as some 'fundamental' data or other theme surfaces again. Be it QE2 disappointment, another debt problem or political tension - there is always something to blame for the price action. If anyone cares.

S&P at Resistance - Reversal after QE disappointment?

What we have here?

Candle pattern says Shooting star followed by a Hammer - do we have a signal - I assume at least caution here but we gotta hear what Mr. Bernanke has to tell markets at this critical junction.

Shanghai Composite - Momentum Persists!

Following on my previous call (http://constellation1976.blogspot.com/2010/10/shanghai-composite-momentum-buy.html) on the Momentum strength in SSEC here we are above the 200-Day MA.

Next target is the confluence of the Trend Channel and the previous lows around 2950.

Shanghai Composite - Momentum Buy!

China is on the move up - trend momentum is rising and RSI is converging. Once 2700 is cleared we target the 200-DMA.

Equities, Bonds, Commodities and FX Markets Update

EUR/USD found support above 1.27 at around 38.2% Fib (1.1860 - 1.3350) and is close to the Trendline support - a close below 1.27 confirms a trend reversal.

SPY broke heavily through the Trendline support and is leaking badly to the downside with first target around 105 which contained the trend in the previous test. A break lower would show high risk of making new lows and possibly reverting to new bear market.

TLT - Bond markets are creeping higher in a mighty trend style while long term yields are depressed and deflationary pressure is rising - FED's move into Quantitative Easing 2.0 is definitely in progress but seems there will be more pain until Inflationary theme kicks in - possibly 6 to 9 months if the first stimulus campaign and its results from March 2009 could be any guide.

GLD - Gold is trending higher again after the correction in July. We need to see 120 broken for a test of the all time highs. There are plenty of rumors and research on gold manipulation and price suppression however until deflationary pressure is cooled off I assume it's pretty normal for Gold to correct its price. On the other side John Paulson and David Einhorn which are high level hedge fund professionals have large allocations in GLD and physical Gold so I keep na eye on the trend strength.

Copper has been bullish despite the stock corrections. Its chart seems like a large swing graphic of the economic tides and its over sensitivity to the industrial activity. I expect it to go down until we have new stimulus measures from the global governments as it seems the first stage of the stimuli-induced growth is already losing strength and austerity measures are not of great help.

Crude Oil is near support as ween from the trend channel - I would expect however to see it lower as inflationary pressures are pretty far away and economic growth is not on the main list for the time being.

VXX the short term VIX fund is basing and creeping higher as stocks decline and markets are going back i to Risk OFF modus operandi. I expect VXX to rally along with the Bond market and the SPY decline since September is usually a pretty volatile month and it's time to shake off the complacency of the markets that has been ruling as of late.