Technical talk: S&P 500 remains in uptrend, but divergence starts showing up

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The comments below were provided by Kevin Lane of Fusion IQ.

As seen in the chart below, the S&P 500 still remains above its uptrend line (green line). As long as this is the case investors have to respect the long trade. Only a break below the uptrend near 1,200 followed by a close below last Thursday’s intra-day low (1,190) would change this posture and suggest a more defensive tone to investors’ portfolio.

Currently there is a minor divergence between price and momentum as measured by the RSI (red arrows). Typically, near topping processes (whether large or minor tops) price moves higher while RSI moves lower, so at a very minimum it is something to register in the back of one’s head.

Remember risk management is not a passive activity but an ongoing re-adjustment process. The higher we go the harsher the correction when it ultimately occurs. Take an active look at your current stop losses and value at risk today and see if they need any readjusting.

Source: Kevin Lane, Fusion IQ, April 27, 2010.

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