sp500 Technical Analysis November 23 2011

Today the sp500 collapsed again on lackluster volume.  The tape continues to look very weak and continues to create high probabilities that the stock market is moving into an important renewed bearish long term trend strength as we finish up November 2011.  Best Online Trades was correct in forecasting a ‘ black Thanksgiving ’ last week, so where do we go from here?

Today the UUP us dollar index ETF also blasted higher north through its rising wedge formation (which is normally to be associated with a bearish trend).  But the UUP managed to blast north from the potential bearish rising wedge.  This is a concern for the sp500 and points to more weakness ahead for the sp500.

At this juncture it looks like 1136 is on the horizon and perhaps even during the half day trading day on November 25, 2011.  The sp500 technical analysis suggests that 1136 is near the bottom of recent channel support.  One would ‘normally’ expect some type of bounce from this zone.  The price action after such a bounce could really start to send some strong signals about what this market wants to do.

Is the sp500 Technical Analysis Suggesting a Massive New Bear Leg?

The last several days of price action has caused me to become quite concerned about the longer term structure of the stock market.

Previous to the last 5 days price action, the sp500 had the opportunity to build a new strong uptrend that would have reversed the longer term bearishness of the stock market (on the monthly scale).  But the last 5 days showed a complete rejection of this scenario.  And now moves my mind into possible bearish tape action that could be devastating over the next 12 to 13 months.

If I am correct on this longer term forecast then we are likely to see some type of channel bounce in the sp500 near the 1136 range.  This bounce could be a normal Fibonacci retracement level and last several days.  But by then the December 2011 monthly trading candlestick will have started its formation and if this December 2011 price candlestick turns hard down then the sp500 is in big big trouble on a longer term basis.

Some other facts:

  • The sp500 had a huge upside rally from early October 2011 into mid November 2011.
  • This upside rally failed at the 200 day moving average and was rejected there.
  • Now sp500 price resides below the 200 day moving average and below the 50 day MA
  • The 200 day moving average is in a downward slope!
  • The 50 day moving average is starting to curl down again in a downward slope.
  • We still have a weekly confirmed MACD histogram sell signal.

So it is starting to become clear that the early October 2011 rally was a bear market rally, not a new bull trend with sustained upside.

The reality of bear market rallies is that once they complete, they tend to resume the original direction quite rapidly.

My monthly tape reading and technical analysis of the sp500 is really quite concerning to me at this juncture.  When I look at the long term monthly chart I see the sp500 over the course of the next 12 to 13 months in a nasty bearish down trend possibly into the November 2012 election.  This could end up being the bear market’s ‘last stand’ and attempt to finish off any last remaining long term bullish hope.

We could be on the cusp of the phase where most long term investors reach the point of ‘never wanting to hear or talk about the stock market even again’.

Bonds are skyrocketing again and the dollar looks like it wants to springboard higher.

It appears that a very dangerous bear market continuation is at hand in the sp500.

The sp500 Quarterly Price Chart Technical Analysis

Pay attention to the MEGA trend charts in the sp500.  If ignored, then one does not gain the proper perspective of the major tides at work in the stock market. 

The sp500 Quarterly Price chart at today’s juncture looks potentially extremely bearish.

There exists a bearish triple M pattern on the MACD histogram of the quarterly sp500 price chart.  This bearish triple M is as of yet not confirmed, but it is starting to look like it will be confirmed by the end of the year.  It would be confirmed with a close below 1101 in the sp500.

A confirmation sell signal on the quarterly sp500 would indeed be bad news for the sp500 in 2012 and would support the case of a bearish dive down into the 2012 November election.  When I say dive down, I mean a total an utter melt down.  But 12 to 13 months is a long long time in the stock market tape action so it would still probably appear to be somewhat of a normal decline.  The stock market has a way of be sneaky like that.

Still Choppy Technical Market Action with a Bearish Bias

So it seems to me that the best sp500 technical analysis suggests that we are in for still somewhat choppy action with a bias towards the downside.

Assuming we get the confirmed bearish quarterly sell signal in the sp500, then it would suggest the most devastating downward price phase would occur in early to mid 2012 time frame.

Keep in mind that the quarterly trend is the slowest moving trend and is like a massive ocean liner almost moving in slow motion.  It is only in the more advanced stages of the stock market decline (when the moving averages are in both steep downward slopes) that one can expect the most devastating and the fastest price destruction.  I do not want to get too far ahead of myself with only 5 days price action, but it is starting to appear like this is where we are eventually headed in 2012.

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