Technical Analysis : Week 47/09

The S&P 500 Index closed at 1093 last week. This indicated a gain of 24 points (2.4%) from the previous week’s close.

The market had to thanks the Dollar for another great run for the week. The dollar weakens on Monday after the negative comments from the official. Traders and investors gladly took it on stride as it bid the market furiously on Monday.

The market continues to ignore the bad economic data such as consumer sentiment and IBD/TIPP Economic Optimism. The market look set to close higher for the year of 2009.

Technically, S&P 500 Index had blast through the 20 moving average and the 1075 level convincingly, indicated that the bullish momentum is still very strong. However, S&P 500 Index fail to establish itself above the 1100 level, will cap the movement of the bull. This week the market will likely to test 1100 level again, with the objective of establishing itself above the psychological level of 1100. Looking at the chart, S&P 500 Index failed to close above the red color trend line on Friday, might indicate that the bull have exhausted from the great run off the March low.

The street’s optimism and confidence in the market remain high after the officials stated that the Dollar is still slightly overvalued in the world. Throughout the week, most of the articles have pointed a weaker dollar for the next couple of months.

Looking at weekly candles, the S&P 500 Index is suggesting a pause. The weekly candle shows an ugly shooting star that indicates a reversal or pause in the coming week. The psychological level 1100 will likely to act as a strong resistant for the market.

Looking at daily candles, we also have an ugly shooting star candle signaling that the S&P 500 Index looks like it might be starting the week slightly to the downside. The market will likely to be flat.

The immediate support levels are S1: 1075, S2: 1050 and S3: 1025.
The immediate resistance levels are R1: 1100, R2: 1125 and R3: 1150.

In conclusion, the market this coming week is likely to be very volatile as there are many economic data that are schedule for releases. The market sentiment remain bullish and this likely means that the market will test the psychological level 1100. If the market able to establish itself above the psychological level in the coming week, it will be able to surge higher for the end of the year. The market will have to find support from the weak dollar as it propels itself higher in year 2009. Therefore, the weakness of the Dollar will be the key towards the bullishness of the market.

From,
Lawrence Chua