This is just a brief post and mini follow up on the S&P 500. In a previous post I had mentioned that the S P 500 was creating what appears to be a rising wedge pattern.
Today it looks like we broke down out of this pattern with fairly heavy volume of 1.65 billion shares. Prices usually move swiftly when they fall out of or rise up from wedge patterns. Assuming we get to 1165, that level will be key to examine to see what the volume test is relative to the previous swings. There is no doubt that the entire up move in the S&P 500 from the 2003 lows has been impressive, but the question always is when is the next intermediate trend change coming?
Is the S P 500 destined to create a massive trading range between 800 and 1200 ?
The support that must hold on the S P 500 is the 1125 to 1150 level assuming we make it there.
Also important to note is the monthly MACD indicator seems to be quite mature in its advancement and may be giving early indications of the beginning of a intermediate term trend change. A negative crossover by the monthly MACD on the S P 500 index would be quite a bearish sign and obviously have implications for most broad market stocks.
The CRB index blasting to new highs daily.. Crude Oil hugging resistance at 55 or so. And GOLD creeping up every so slowly and quietly. Could it be that we are on the verge of a major trend change in the S P 500 and Gold/Commodities?
For the longest time commodities have powered higher, and so has the S P 500 and the broad market. It has been an across the board run up in almost everything to be quite frank. But the question some people have to be asking is how long can this go on?
It is true that inflations can exaggerate moves in everything, gold and commodities, real estate, the broad market. But who will ultimately be the winner in an accelerating inflation? If you answered commodities I believe you are correct.
The key here is to try to identify if 2005 will be 'the year for gold'. I have some evidence that suggests this could be the case, but ultimately as I am sure you agree it all depends on the price charts and specific levels either being broken or unsuccessfully broken.
The next series of charts I post on here will be gold and silver charts, hopefully before the end of this week.
Determining which way gold will go this year could be the factor that helps to decide what everything else will do (broad market, bonds).
It sure won't be easy but I will post some charts up that may shed some more light on the subject!