S&P500 update

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a reader has written to ask that dow has an opposite rsi trend while sp500 looks still a rising rsi.

i have not tracked sp500 usually since dow is quite a good estimate although sp500 is more indicative of the economy since it is composed of 500 largest companies in the states.

now look at this chart, a futures spot month chart of sp500 since i do not have a sp500 chart, it should be a good enough proxy.

sp500 has a good base looking towards 2260 [now only 1700], but it wont be happening right away, the slightly downward neckline confirms this trend. this trend forms over a five year span [2007-2012] so it should be quite accurate.

there are some reasons to the slightly bearish short term view vs a bull medium term view as:

• the rsi is sloping downwards while the sp500 is sloping upwards, in line with the dow trend [read earlier blogs on dow]. if you look back in history on this chart, an uptrend not supported by a rising rsi is followed by sharp corrections.
• the low reach in 2012 nov is about 1350 [1346 to be exact] and we are not in 2013 nov yet but we are now at 1700, a rise of 26%, do not forget the low reached is not a medium term low, it is only a correction, so the high reached is even more phenomenal. the earlier low is reached in 2012 may [just a few months earlier], that low is 1264. if you use the may low, the rise is 34%.

shd you have read this blog on earlier updates of hsi, it also is forming a strong base that can point to much higher levels provided it does not fall off the w [or 2v] trend as described earlier in this blog.

compare this update with earlier updates on dow and hsi.

the conclusion is - buy on corrections in steps not one off, do not chase up on highs as it is not cheap by any measure.