Wednesday, January 20, 2016

Charting The Markets.............

Charting The Markets

The U.S. markets have broken down technically to start 2016. Each major benchmark has violated significant support, opening the path to potentially material longer-term downside.

Consider that the Dow Jones Industrial Average has plunged more than 1,900 points since Dec. 29, while the Nasdaq Composite has notched a 14-month closing low, and the S&P 500 Index has briefly tagged 15-month lows.

The S&P 500's long term perspective

The S&P 500's  hourly chart highlights the past two weeks.

The S&P extended its downtrend last week, briefly reaching 15-month lows. Initial resistance holds around the 1,900 mark, and is followed by firmer overhead at 1,950.

The S&P 500 has narrowly survived a test of truly major support — at least so far. The specific area rests at the August low of 1,867, and the S&P closed last week slightly higher, at 1,880.

The S&P 500 remains tenuously positioned in the truly longer-term view. The chart below is a three-year view; each bar represents one week. Significant support rests at 1,886, a level matching the October 2014 weekly closing low. The S&P closed last week at 1,880, marking its worst weekly close in 19 months.

Still, deeper support rests at the August low of 1,867, a level the S&P has thus far narrowly maintained.

This area very broadly — S&P 1,867 to 1,886 — matches the neckline of a massive head-and-shoulders top. On a violation, a projected longer-term target holds around 1,640. (Take the distance from the top of the head to the neckline, and project it under the neckline.

This next chart below is a 22-year view, with each bar representing one month.

Consider that since 2000, it's been challenging to assign a worthwhile market value — defining where the market "should" be — by employing fundamental metrics like economic reports, price/earnings ratios, and so on.

But from a technical standpoint, the S&P's 20-month moving average has marked a useful longer-term trending indicator. Despite false starts in 2010 and 2011, it's effectively captured major market trend shifts.

The S&P's 20-month moving average currently rests at 1,981, and the index is on pace to notch just its second monthly close lower in over four years. (September 2015 marked the first monthly close lower.)

More plainly, the January downdraft has raised the flag to a potentially meaningful longer-term trend shift.

Also consider that the S&P's 1,640 target on the weekly chart — projected from its head-and-shoulders top — isn't too distant from the multi-year breakout point, around 1,575.

Notable resistance rests at last week's high of 1,950. Significant overhead spans from 1,981 to 1,993, an area matching the S&P's 20-month moving average. The S&P 500's longer-term bias remains bearish pending a close higher.

The Dow Jones Industrial Average has briefly ventured under the 16,000 mark.

Near-term resistance holds around 16,230, and is followed by firmer overhead just under 16,600.

The Dow Jones Industrial Average has plunged from major support at 17,125. Initial support rests at 15,980, and is followed by a modest floor at last week's low of 15,842.
The Nasdaq Composite's downtrend is firmly intact.

The Nasdaq  index gapped under the 5,000 mark to start the new year, and has established a series of "lower lows" and "lower highs."

Its near-term inflection points are poorly-defined, though initial resistance rests at 4,573, and is followed by more significant overhead at last week's high of 4,714.

Widening the view to six months adds perspective. On this wider view, the Nasdaq has fallen off a cliff, notching a 14-month closing low.

The iShares China Large-Cap ETF

The iShares Europe ETF

The iShares Transportation Average ETF

The SPDR S&P Retail ETF

The Industrial Select Sector SPDR

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