S&P 500 Index: Short-term buy signal confirmed

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I am writing to you from my hotel room in New York, keeping the post short and to the point as a full day of appointments lies ahead.

Further to my post of two days ago, “U.S. equities – downtrend arrested?“, my short-term technical buy signal for the S&P 500 Index has been confirmed. The rationale is explained below.

The Shiller S&P 500 PE10 has broken the 40-day moving average on the upside.

The PE10 has broken both the 12- and 26-day exponential moving averages on the upside, while the 12-day moving average is about to cross the 26-day moving average on the upside.

The MACD of the PE10 is bottoming.

The VIX has broken the short-term support.

The MACD has crossed its nine-day moving average and signaled a buy for the PE10.

But it will be a rough ride. The VIX is likely to encounter support at 24.

The RSI of the VIX is entering oversold territory.

The PE10 has closed the gap with the VIX.

The RSI of the PE10 and VIX (inverse) has bounced from an oversold level.

Sources: I-Net Bridge; CBOE; Plexus Asset Management.

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Read more on S&P 500 (SPX), Volatility Index (VIX) at Wikinvest
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4 comments to S&P 500 Index: Short-term buy signal confirmed

  • Mike

    Thank you for all the charts, but the reality is that technical analysis and fundamental analysis is entirely useless in a headline-driven market. The market goes up based upon news of banks providing a solution to the debt mess, the market goes down based upon fear that the solution is not enough, etc. Times have changed, we do not trade based upon indicators or analysis, for the next headline may entirely refute our indicator. Just my thoughts.

  • Tony

    The 40 day M.A. for the S&P500 will give you the same result as the 40 day M.A. for the S&P 500 PE 10 as far as M.A. cross overs are concerned.

    What additional benefit is provided by using the S&P500 PE 10 for this measure?

  • Tony

    Mike

    The DAX (the centre at which all current market turmoil is currently happening) demonstrated a classic, bullish, 3 white soldier candle stick formation prior to yesterdays news(30/11). In other words, this technical method picked up that something was about to happen-insiders.Have a look here:

    http://stockcharts.com/h-sc/ui?s=%24dax

    As a full time trader, I would not go to work without candle sticks and other technical indicators. Since the 4 October I’m up 12% trading the recent volatility.

  • Mike

    Thank you for that information, and yet I still maintain technical analysis is entirely dead — at least until the market begins to stabilize.

    Likewise I am a full time trader, and selling volatility I am up well more than double digits in the past month. But I refuse to trade technicals now.

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