The S&P 500 saw three higher finishes in a continued push higher during the past week. The bulk of the week’s gains were made during Monday’s session. After pulling back from that high the index spent most of the later rebounds in recapturing the earlier gains and finished only a little higher than that close. The index added 1.58 percent in a second straight week of gains. The index has finished lower in 44 of the past 79 sessions.
The S&P 500 weekly chart pictured above shows the index in a longer time frame this week. This chart shows developing similarities to previous market tops. This extended view shows the upper trend, lower trend and lower support lines established in the runs higher into the tops in 2000 and 2007 along with the current rebound from 2009 crash lows, along with resistance and crash support levels from previous research. This series shows the S&P 500 currently appears to be developing a topping pattern that looks very much like those seen prior to the two previous market crashes.
The S&P 500 broke back above the lower trend line during the past week. Monday’s high stopped near the lower trend line before the index retreated from this resistance on Tuesday. It fell further early Wednesday before it began a steady climb from session lows into a higher finish. The run continued to the lower trend line on Thursday. Although somewhat difficult to see in the extended time period, Friday pushed above the lower trend line but slipped off those highs to finish the session at a loss and back below the lower trend line. Although the index broke back above the lower trend line, it retreated quickly back below it. The index has seen several failures near this trend line. Even a continued push above it is now susceptible to a further retreat later, making a drop back to or below the lower support line seem probable.
Oil prices began to rebound on news of a possible output freeze agreement between Iran, Russia and Saudi Arabia. Although talk of a freeze has already soften as both Saudi Arabia and Iran have said an output freeze is meaningless, even if OPEC agrees to a freeze it will come too late to stop a huge influx of oil from Iran, as they have continued with planned increases in production. It seems likely they could add more than a million barrels per day production before a freeze is actually put into place. An OPEC freeze really is meaningless, over 60 percent of the world’s oil comes from non OPEC members that will gladly supply any oil OPEC does not. Oil stock piles are very high and growing in all producing countries, with no market for these stock piles in sight.
The rebound in oil appears too little too late for many of those with junk status loans. The rate of defaults will likely quicken in the weeks and months to come. Many see the rate of junk bond defaults doubling and some even near tripling during 2016, with the range of expected defaults from around six to ten percent. Bank of America Merrill Lynch reported earlier that the US junk bond market finished 2015 with a trailing twelve month default rate of about 3.4 percent; a higher rate of default than the 3.1 percent in the emerging markets. Goldman Sacs recently rated 40 percent of all oil industries debt as junk. The S&P Rating Services has 50 percent of the oil industries debt as distressed along with 72 percent of the metals and mining industry. During the current quarter many that saw continued sales downturns also saw credit ratings fall or reach credit watch negative status, indicating a more likely future credit downgrade. Many of these credit downgrades or watches are now coming from outside these two troubled industries; indicating credit problems could now be expanding.
Although many believe that a rebound in oil prices will help the overall market, under economic conditions very similar to those we have now, history appears to show otherwise. During the previous commodities super cycle collapse, a rebound in oil prices led to the collapse of the Asian markets. The Asian markets are in a very similar position today. Many are having economic problems now very similar to those they did then, problems that higher energy prices are only likely to exacerbate.
The Asian markets remain highly overpriced, even after large stock price declines. This was also true in the previous collapse. At that time the Nikkei was very highly overpriced; even after it fell well off the high it has not seen since. The punch of that collapse has left Japan’s economy staggering ever since. At that time Japan was the world’s second largest economy, but it has since slipped to third. According to the World Bank data, it finished 2015 with negative GDP growth compared to its 2000 GDP. Although many project a higher finish, it has shown basically no GDP growth during the past 15 years. Its economic problems seem far from over. It therefore seems more likely Japan could fall to the fifth or sixth largest economy by 2030, than remain in the top four.
China’s markets look strikingly similar to the late 1990’s Nikkei in many respects. China is now the world’s second largest economy. It has seen a long run of growth that carried it into the second spot. It is impossible to keep a growth rate going at those early levels, but China did many things to try to keep those growth rates going. These actions are beginning to falter just as Japan’s did.
China’s markets ran to extremely high over valuations, with many of its stocks reaching P/E ratios well in excess of 1000. It followed in the footfalls of many of the past’s failed attempts to prevent a market collapse after this highly overpriced market began to falter. China continues to spend its resources to try to prop this overpriced market up, most recently building another fire under its already bubbled real estate sector; one that has built nearly entire cities that still remain mostly uninhabited years after they were built. As a result is depleting its vast surpluses very quickly, surpluses it is very likely to need later to bail out its banks. Japan has a huge debt problem now, largely due to the failed actions it took then and has continued since. Although it might seem impossible now, China appears to be on a course that could lead to the same outcome.
China’s Shanghai Composite again fell steeply as it neared a possible ceiling resistance. After nearing 3000 with this rebound’s highest close of 2928.90 Wednesday, the index cascaded 6.41 percent lower Thursday. Asia’s markets saw 10 volatile declines in that session, with six of them in excess of six percent. The Shanghai edged almost a percent higher on Friday, but is still less than many of the volatile retreats it has already seen this year from new 52 week lows.
The world indexes continued to see elevated volatility as many sessions finished with two percent or greater price changes during the week. Many of these moves continued higher, but unlike the previous week, many were also lower. These turns lower were seen as indexes reached fully overbought conditions and many failed at or near previous resistance levels. Some broke above recent resistance, but still remained firmly entrenched within overall downtrend channels. The increased incidence of volatile downturns as world markets reached overbought levels after volatile rebounds is concerning. Although these rebounds may seem bullish, volatile conditions are most often bearish and volatile rebounds often turn volatilely lower.
Earlier reports made it seem possible that the retail sector had a good holiday season. Many of the retailers reported earnings in the past week or had already reported. Unlike the rosy outlook of a 7.9 percent sales increased painted by MasterCard (MA) shortly after the holiday season finished, most did very poorly. Many retailers report their best earnings in the fourth quarter and that makes the majority of these reports seem troublesome. A sample of earnings reports for the sector is included below.
Friday JC Penny (JCP) reported better than expected revenue, but a loss of 131 million or 43 cents a share in the fourth quarter, compared to a loss of 35 million or 11 cents a year ago, adjusted earnings came in at 39 cents a share, up from zero the year before. Others that reported earlier did not fare well. Gap Inc. (GPS) reported a 6.9 percent decline in sales resulting in adjusted earnings of 57 cents compared to 75 cents in the year ago quarter. Kohl’s Corp. (KSS) saw sales rise 0.8 percent, but saw profits slide to $293 million from $369 million or $1.58 per share from $1.83 in the year ago quarter. Michael Kors Holdings (KORS) also reported a 0.8 percent increase in revenue, but saw profits slide to $294.2 million from $303.7 million the year before.
Macy’s (M) saw comparable store sales slide 4.3 percent and reported profit of $544 million compared to $793 million a year ago or $1.73 a share compared to $2.26 a year ago. Macy’s earnings were hit hard by its cost savings measures as it is in the midst of cutting thousands of jobs and closing 40 stores. As a result adjusted earnings were $2.09 a share versus $2.44 a year ago. Fossil (FOSL) reported a 6.8 percent drop in revenue and earnings of $70.4 million compared to $154.1 million a year ago or per share earnings of $1.46 and down from $3.00 a year earlier. Nordstrom Inc. (JWN) saw revenues increase 3.7 percent, but also saw a 12 percent increase in unsold inventory as sales slipped drastically in its full priced stores. As a result profits were $180 million compared to $255 million a year ago or $1 per share and well below the $1.32 last year.
Wal-Mart (WMT) saw revenue slide 1.4 percent and profits slip to $4.57 billion down from $4.97 billion a year ago. Excluding items per share earnings were $1.49 compared to $1.53 the year before. Dillard’s Inc. (DDS) reported adjusted earnings of $2.31 compared to $3.17 a year ago. Sears (SHLD) saw same store sales declines of 7.2 percent in its Kmart stores and 6.9 percent at its namesake stores. They reported a loss of $580 million compared to a loss of $159 million the year before. On a per share basis Sears lost $5.44 a share compared to $1.50 the year before and on an adjusted basis losses were $1.70 and greater than the 34 cent loss of a year ago.
Best Buy (BBY) saw revenue slip 4.1% and reported earnings of $1.39 a share compared to $1.47 the year before. Excluding items they had earnings of $1.53 versus $1.48 a year ago. Best Buy warned of continued revenue declines in the first half of this year. Bed Bath & Beyond saw revenues inch 0.3 percent higher, but reported operating earnings of $1.10 a share and ten cents below the year ago quarter. Costco Wholesale (COST) saw revenues increase 1.3 percent, but had operating earnings slip 3 cents below the year before to $1.10 a share. Target (TGT) saw revenues slip 0.6 percent but reported operating earnings of $1.53 and a cent above the year ago quarter, with the increase partially due to share repurchases. Target’s holiday shopping season was saved by its online sales, as its online sales grow 34 percent that followed a 20 percent increase in the quarter before.
Amazon (AMZN) saw revenue increase 22 percent and reported its best earnings quarter ever with profit of $482 million compared to $214 million or $1 a share and up from 51 cents a share a year ago. Online sales increased 24 percent. The board announced a $5 billion dollar share buyback that replaced the $2 billion share buyback plan approved in 2010. Although at first glance these numbers might look impressive, consider a few things:
It took five years to beat the previous earnings record it set in the fourth quarter of 2010. They were expected to make $1.65 a share on Jan 21 and that projection fell to $1.56 before they missed miserably on Jan 28. In the past year alone they diluted outstanding shares by 7 million through stock based compensation. Those shares had a market value of $3.887 billion at Friday’s close. The $2 billion approved for share buybacks in 2010, wasn’t fully used after five years. Their current stock repurchase program is a bad joke as far more shares will be added than retired. The stock price is currently north of $555 a share and has a TTM P/E of 447.70.
Many brick and mortar stores saw large online sales increases, which buffered losses during the recent reports. Online sales competition is likely to continue to increase. To make matters worse, Target has targeted Amazon’s online sales. Although Target has only five percent of Amazon’s online sales now, considering both companies’ recent track records and others that are directing more effort towards increasing online sales, this could be a real problem for Amazon. Amazon has already dropped one of the things that was a large reason for the increase they saw in the past quarter, as they increased minimum purchases to $50 to qualify for free shipping.
Given the miss during the year’s strongest earnings quarter and Amazon’s past track record of underperformance and history of doing the wrong thing at the wrong time, it does not seem likely they could make any of the current quarterly projections for the upcoming year. It took a $6.4 billion revenue increase to push earnings up just 49 cents. Their strongest earnings quarter ever, was only $1. Amazon continues to look very far overpriced. This is not a $555 stock.
Earnings slipped outside the traditional seasonal sales stores too. Whole Foods Market (WFM) saw revenues increase 3.4 percent but saw profit slide to $157 million from $167 million the year before as the company has been forced to reduce prices to compete. Per share earnings were 46 cents and the same as a year ago due to share repurchases. Grainger (GWW) saw revenues slip 1.3% and reported operating earnings of $2.62 missing the year ago quarter by 23 cents. Grainger had noted in earlier reports that sales problems are directly related to cost savings measures by its customers and that they expect these problems to continue. Advanced Auto Parts (AAP) saw revenue fall 9.1 percent and reported operating earnings of $1.15 per share and 35 cents below the year before. Auto Nation (AN) saw sales revenue increase by 5.8 percent, but due to the need to provide discounts or rebates to make these sales, saw per share operating earnings of 96 cents that were eight cents below the prior year.
Not all did poorly. Home Depot (HD) saw revenues increase 9.5% and operating earnings jump to $1.17, a 16 cent increase from the year before. L Brands Inc. (LB) saw a 13% increase in profits as they reported earnings of $636 million compared to $564.8 million a year ago and earned $2.15 a share versus $1.89 a year ago. Lowe’s (LOW) saw revenue rise 5.6 percent, but saw profit slip to $11 million from $450 million due to an impairment charge of $530 million. Adjusted earnings were 59 cents a share compared to 46 cents a year earlier. TJX Companies (TJX) saw a 7.9 percent increase in revenue and a 6 percent increase in same store sales, but only a 4.2% increase in profits as they reported operating earnings of 99 cents compared to 95 cents a year ago. Just like in every sector, a few are still doing well, but they are also arguably overpriced. Home Depot has a TTM P/E of 23.50, TJX 22.48, L Brands 21.47 and Lowes 20.88.
The past week’s earnings reports insured that the fourth quarter will finish with over half of the S&P 500 constituents reporting revenue losses compared to the same quarter a year ago. It will finish the quarter with an increase in those cutting or suspending dividend payments. It will finish the quarter will an increase in credit ratings downgrades with these downgrades spreading outside the Energy and Materials sectors. It will finish the quarter with an increase in those reporting negative earnings in their TTM and an increase in the numbers reporting negative quarterly earnings.
Considering the low numbers left to report, it is likely for the S&P 500 constituents to see over a 25% reduction in reported GAAP earnings compared to the same quarter a year before. It is likely to see mid-single digit percentage decline in operating earnings and a low single digit decline in revenue compared to the same quarter a year before.
The first quarter earnings are most often the worst earnings of the year, and most often fall below those given in the fourth quarter. Current projections for the first quarter, which appear high compared to company guidance in many cases, make it seem likely similar or even worse earnings problems could be seen in the coming quarter. Stock prices could continue higher, but it was not good earnings reports that were carried them higher in the recent rebound. Many of the stocks that saw rebounds in the past week had dismal reports. The current earnings environment makes stocks in every world market appear very risky.
The S&P 400 saw one constituent change in the past week. The data below was adjusted for this change. Two other constituent changes were announced for the S&P 400, but will not take effect until later. No constituent changes were made to the S&P 500 during the past week.
The following earnings update may not include all constituents that reported earnings during the past week and it could include some that reported earlier. Earnings were found for 56 of the S&P 500 constituents that reported fourth quarter earnings. These constituents reported total earnings that were $5.87 lower than they reported the same quarter a year ago. This represented a 0.28 percent decrease of the index’s total trailing twelve month earnings from a week ago and an average decrease of 3.31 percent in the TTM earnings of those constituents. There were 27 constituents that reported earnings greater than the same quarter of a year ago, one the same as a year ago and 28 reported earnings below the same quarter of a year ago. One of the constituents included in the earnings greater than those of a year ago reported earlier and was counted as unchanged in that update, but had earnings updated since. This resulted in an increase of 43 cents.
Projections for fourth quarter earnings saw no changes from those of a week ago. Those that had already reported fourth quarter earnings prior to the current week saw a $2.62 reduction in first quarter earnings projections. There were 32 constituents with increases and 85 constituents saw decreases.
The S&P 500 constituents saw current year earnings projections decrease by $7.92 compared to a week ago. There were 94 constituents that saw their current year projection increase while 134 saw decreases. The constituents that saw fiscal year changes are reflected in this data and appeared to adversely affect this week’s outcome.
There were 49 constituents that reported their fiscal fourth quarter earnings and as a result changed current year earnings from 2015 to 2016 or 2016 to 2017. The change of fiscal year earnings resulted in earnings that were $3.57 lower than the projections in the just completed year. There were 29 that saw increases and 20 saw decreases. There were only two increases greater than one dollar, with the total of those two increases being $2.92. There were five decreases of greater than one dollar and the total of these decreases were $9.57 lower. Four of the five largest decreases were energy sector stocks, including the just added Concho Resources Inc. (CXO).
The S&P 500 saw 327 constituents that finished the week below their 200 DMA, compared to 357 a week ago. There were 358 constituents that finished the week either below their 200 DMA or less than one dollar above it, compared to 379 a week ago. There were 346 constituents that finished the week with a 200 DMA in decline compared to 355 a week ago.
The S&P 500 saw 360 constituents finish the week greater than ten percent below 52 week highs, compared to 381 a week ago. There were three constituents that finished the week less than five percent from 52 week lows, compared to 19 a week ago. There were 40 constituents that saw new 52 week highs while six constituents reached new 52 week lows during the week. The stocks that reached 52 week highs finished the week with an average P/E of 20.74. The average even weighted TTM P/E of the index increased with the index price and the week’s poor reported earnings to 18.73.
There were 281 of the S&P 400 constituents that finished Friday beneath their 200 DMA, compared to 298 a week ago. The index finished Friday with 300 constituents either below or less than one dollar above their 200 DMA, compared to 322 a week ago. There were 261 constituents that had a 200 DMA in decline, compared to 290 a week ago.
There were 307 of the S&P 400 constituents that finished the week greater than 10 percent below 52 week highs, compared to 329 a week ago. There were four constituents that finished the week less than five percent from 52 week lows, compared to 18 a week ago. The mid-caps saw 24 constituents reach new 52 week highs while 10 fell to new 52 week lows during the past week. The S&P 400 finished the week with an average TTM P/E of 18.93.
The featured and supporting indicators discussed below are not always correct, but they have been many times. Being so they are worth reading about and taking note of.
The 100 L, +2% H, -2% H, (+)/- 90 D and 90 E indicators are currently active. See a more detailed description of most of the indicators developed through research and featured in these articles here.
The S&P 500 saw no volatile events during the past week. The index has finished above the 13 EMA in eight straight sessions and broke above the 50 EMA during the past week. Friday’s session broke above the lower trend line, but retreated to finish the session below it.
The S&P 500 opened Monday higher at the session low of 1924.44 and pushed to a session high of 1946.70 before slipping to finish at 1945.50 within the 1940 to 1955 MRL. Tuesday opened lower and continued to a low of 1919.44 before rebounding to a finish of 1921.27, both within the upper half resistance of the 100 L at 1900. Wednesday opened lower covering Monday’s gap higher, and continued to fall to 1891.00 before finding support in the lower half of the 100 L at 1900. It reached a high of 1932.08 and closed at 1929.80, both outside a likely resistance/support level. Thursday opened higher but retreated to a low of 1925.41 finding support just above the upper half resistance of the 100 L and covering the opening gap before running higher to finish at 1951.70 near the session high of 1951.83 and within the 1940 to 1955 MRL, with that run covering Tuesday’s gap lower. Friday opened higher and continued higher to 1962.96 before slipping outside a likely resistance area back to 1945.78 and covering the opening gap before finishing at 1948.05 and within the 1940 to 1955 MRL.
The index left no opening gaps during the past week and also covered the Feb 17 gap higher. Gaps lower on July 22, Dec 2, Dec 7, Dec 8, Dec 30, Dec 31, Jan 5 and Jan 6 along with gaps higher on Feb 12 and Feb 16 remain open. Although all of these gaps are likely to be filled at some point, current conditions make it seem possible some of the gaps lower could remain open for some time.
The (+)/-90 D indicator that became active on Oct 21, 2015 appears to have bearish potential. It has performed as follows to this point in the standard format of highest close / lowest close / last close: +4.50 percent / -9.40 percent / -3.51 percent. This indicator will expire after Wednesday’s close.
The -2% H and +2% H indicators saw no correct indications during the past week. Most supporting volatility indicators pushed to new extreme highs in the past week. The indicators point to a high likelihood of continued and likely elevated volatility levels. Recent volatility has been mostly bullish, but volatility is generally bearish in nature.
Although no volatile events were seen on the S&P 500 during the past week; this presence of the 90E has seen nine of the traits commonly seen during its presence. The S&P has so far seen four significant price direction changes and five volatile finishes during this instance the 90 E. Five other sessions had also reached volatile intraday declines but rebounded to finish at less than volatile levels along with one near volatile move higher. There was also one intraday move with less than a volatile finish during this indictor’s fringe area. Although a large increase in volatile activity was seen as this indicator became active, many of the past appearances have seen far greater numbers of volatile events.
The average daily volume decreased 8.69 percent from the previous week. Volume was highest on Friday and lowest on Tuesday. The five day volume variance decreased 9.20 percent to finish the week at 11.77 percent. Volume levels have slipped significantly in the past two weeks, although the past week’s average remained within slightly bearish levels. Volume variance fell to very low levels in the past week, being a somewhat bullish indication; however the index seldom maintains these low variance levels for very long. Very low variance levels are often seen prior to a pullback that again increases the five day volume variance.
Most companies have reported fourth quarter earnings and the results to this point are not pretty. GAAP earnings have fallen drastically as companies take large charges for cost savings measures. Revenues are slipping in the majority of companies that have reported. Operating earnings are in a continued decline.
Company guidance and current projections for first quarter make it seem likely these earnings problems could continue or worsen in the coming quarter. Many see the first half of the coming year to be very challenging for earnings and it does not seem unlikely these problems could extend into the second quarter. The earlier rosy 2016 full year earnings projections have all but vanished.
Credit downgrades are spreading outside the Energy and Materials Sectors. Default rates are increasing. Current projections make it seem likely default rates could more than double in the year ahead. Some companies that were already hanging by a thread saw dismal earnings in their fourth quarter, which is historically their strongest earnings quarter.
The major world indexes continued to see very high levels of daily volatile activity. Many of these moves continued higher, but there was a stark increase in volatile moves lower. Many of these indices have reached fully overbought conditions, making the increase in volatile downturns seem a concern.
Most of the World’s indices have been in downtrends lasting over six months. Although many saw very large increases in the recent run higher, most remained firmly entrenched within downtrend channels.
Economic conditions continue to appear to be deteriorating. Increasing numbers of indicators are showing trends common prior to or during recessions.
Earnings are suffering. Forward earnings projections are sinking. The current quarter earnings are showing fewer companies with year over year earnings gains and more with a drop in year over year earnings. More companies are reporting quarterly or year earnings losses.
Worldwide earnings do not appear to justify current stock prices. Although there are some stellar earnings reports, fewer reports are showing the earnings growth required to push already overpriced stock prices higher. A growing number and broadening range of companies are having earnings problems. More and more companies are participating in cost saving activities that will only likely further worsen earnings problems in the quarters ahead.
The latest S&P Dow Jones Indices data shows that with 25 left to report, 251 of the S&P 500 constituents that have reported current quarter earnings reported a year over year decline in revenue. The report shows over a $96 billion revenue shortfall from the same quarter a year ago (three constituents that appeared to have incomplete data were omitted from these totals). Last year’s fourth quarter was a very poor earnings quarter, making the high numbers missing the year ago earnings and revenue very concerning.
If past similarities to current economic conditions and outcomes of those past conditions are any indication; investors will get used to rebounds continuing higher, and then all at once, they won’t. Investors will get used to support levels that hold, and then they won’t either. What did not look possible in the discussions beginning in March of 2014; are beginning to look probable now.
Since the first of the year the current constituents of the S&P 400 and S&P 500 combined to see to over 60 percent reach new 52 week lows. Although the current rebound has reduced the numbers reaching new lows, the high numbers of stocks reaching new 52 week lows in a very short time period along with a fairly steady stream of stocks breaking long term levels are very bearish indications.
Most stocks have continued to hold within long or short term downtrends. Many have rebounded from recent lows and deeply oversold conditions, but remained entrenched within established downtrend channels. Most have reached fully oversold in these rebounds. A large majority of the largest 900 publically traded companies have remained within bearish downtrends below their 200 DMA for an extended time.
The S&P 500 recovered from the most recent significant retreat, but remains within the overall retreat from May highs. The S&P 500 has seen a large number of significant retreats off cycle highs since moving lower from the May high. The large number of significant retreats from cycle highs without recovering the first retreat is a bearish indication. Chart formations from these failures appear to show the index could be turning lower from a top.
The S&P 500 broke briefly above the lower trend line Friday, but retreated below it before the close. The index has seen several failures at or near this trend line. This makes a subsequent fall to or through the lower support highly likely. Seven of the 11 previous drops below the lower trend line have continued to or below the lower support line. Although not a certainty, conditions continue to make a retreat that breaks lower in this instance seem likely. Six of those seven previous retreats include: The near crash in 2011 that fell 19.39 percent, the crash in 2007 that fell 56.78 percent, the crash in 2000 that fell 49.15 percent, the near crash in 1998 that fell 19.34 percent, the near crash in 1990 that fell 19.92 percent and the crash in 1987 that fell 33.51 percent.
The 90 E is active and will remain active for an extended time due to overlapping expiration periods. This active period coincides with a time frame that has historically shown an increased likelihood of volatility. The 90 E indicator’s presence is potentially bearish. Many of the traits commonly seen during its presence are volatile. The indicator has shown nine occurrences of traits that are common during its current presence; five volatile market sessions and four significant price direction changes.
Companies are increasing characteristics that they tend to exhibit prior to larger downturns. Cost reductions are at high levels and increasing. Reductions in stock buybacks, reduced rates of dividend increases and an increase in dividend cuts have been seen. Many earnings reports in the past week included hundreds of millions of dollars in cost savings and cost savings activities are spreading worldwide. The index has seen increases in the number of constituents that have negative TTM earnings along with a large increase in those that have seen quarterly earnings losses. It seems likely the results of the fourth quarter earnings could show worsening conditions in all or most of the above.
Large increases in the numbers of stocks falling to 52 week lows and fairly steady increases in the numbers of breaks of long standing support levels in these drops, decreases in the numbers reaching 52 week highs, increasing numbers of indices within crashes, a break lower from resistance at the lower trend line in a steep retreat, current chart formations along with past timelines, increases in characteristics companies’ exhibit prior to larger downturns, softening economic conditions, worldwide stock overvaluations and continued lackluster earnings make it seem possible the S&P 500 could see a large retreat during the year, possibly reaching crash potentials.
The next likely resistance level above the 100 L at 2100 could be seen at the 2140 to 2160 MRL. Earlier highs on the S&P 500 could have seen the effects of this resistance level, but since the index has not yet reached this resistance level the index is still considered within the influence range of the 100 L. Therefore this resistance is not yet considered active. This resistance appears to have the potential to cause a significant pullback.
Please note there is no established resistance in the MRL levels before the index has reached these levels. Several instances have proven to hold resistance once reached and have also shown resistance or support during subsequent retreats; however MRL levels that the index has not yet reached are only the most likely levels that resistance will be seen based on research. Back tests of the data used to project these resistance levels work well, but they are not always exact, and these resistances could react sooner or later than expected, it is also possible the resistance will not be seen at all.
Have a great day trading.
Disclosure: Ron currently has investments in KSS and BBY and has no investments in MA, JCP, GPS, KORS, M, FOSL, JJWN, WMT, DDS, SHLD, COST, TGT, AMZN, WFM, GWW, AAP, AN HD, LB, LOW, TJX or CXO. He is currently about 54 percent invested long in stocks in his trading accounts reflecting a reduction in the investment level from the prior week. During the past week he reinvested dividends in two issues with the cost of these purchases more than fully offset by the sale of one issue and dividend payments. He will receive dividend payments from 13 issues in the coming week and eight in the following week. If no further investment changes are made during this time frame, these dividend payments would not change his rounded investment level.
Disclaimer: The information provided in the Stock Market Preview is Ron’s perception of the current conditions and what he thinks is the most probable outcome based on the current conditions, the data collected and extensive research he has done into this data along with other variables. It is intended to provoke thought of the possible market direction in his readers, not foretell the future. Ron does not claim to know what the stock market will do. If the stock market performs as expected, it only means he is applying the stock market history to the current conditions correctly. His perception of the data is not always correct.
The opinions expressed by Ron are his own and may or may not reflect those of byteclay.com. This article is not intended to provide investment advice; but instead to provoke thought about investment possibilities. Acting on the information provided is at your own risk. You are urged to do your own research, and where appropriate, seek professional investment advice before acting on any information contained in these articles.