Although I don’t usually comment directly on the stock market or stock indexes and generally limit observations of individual stocks to those that are related to housing and real estate, I thought I might share some basic analysis that I have worked up concerning a pretty grim looking topping pattern now present in the S&P 500 index.Study the following image (click for very large and clear version) of the S&P 500 index from 1995 to today then read below for the technical blow by blow.
THEN (1998 – 2000 Topping)
- A. October 1998 – S&P 500 gives early warning sign by crossing its 400 day simple moving average (SMA). Notice also that the 50 day SMA breached the 200 day SMA.
- B. October 1999 – S&P 500 gives a second signal by crossing its 200 day SMA after a solid twelve month expansion. 50 day SMA touches the 200 day SMA.
- C. Three prominent but decelerating peaks set up the top.
- D. Between second and third (last) peak S&P 500 index breaches 200 day SMA. After the final peak S&P 500 index breaches the 400 day SMA.
- E. 50 day SMA heads down fast and crosses the 200 day SMA.
- F. 50 day SMA crosses 400 day SMA.
- G. 200 day SMA crosses 400 day SMA.
NOW (Today’s Topping?)
- A. June 2006 – S&P 500 gives early warning sign by crossing its 400 day SMA. Notice also that the 50 day SMA breached the 200 day SMA.
- B. March 2007 – S&P 500 gives a second signal by falling near its 200 day SMA after a solid nine month expansion. 50 day SMA similarly depressed.
- C. Three prominent but decelerating peaks set up the top.
- D. Between second and third (last) peak S&P 500 index breaches 200 day SMA. After the final peak S&P 500 index breaches the 400 day SMA.
- E. 50 day SMA heads down fast and crosses the 200 day SMA.
- F. TBD
- G. TBD
