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S&P TREND STRENGTH TO CONTINUE

  • Daryl Guppy
  • 16 March 2017

In late 2014 the market was alive with chatter about the dreaded Hindenburg Omen which was supposed to foretell the collapse of the market. In notes at the time we explained why this analysis was so much clap-trap. Subsequently the S&P added 33%. Now the media is awash with the idea that the S&P is in danger of imminent collapse. This recent talk is just a specious as the Hindenburg omen.

Markets do not suddenly collapse out of the blue, or because some magical number is reached. Markets most often give clear signals of weakness and these shows up as end-of-trend chart patterns.

The most common patterns are:

·         Head and shoulder reversal pattern. This is a long term pattern best seen on weekly charts. It takes months to develop. It is a very reliable pattern both for indicating a trend reversal and for setting downside targets. This pattern is not on the S&P Index.

·         A rounding top pattern. This is also a longer term pattern developing over several months. The pattern is confirmed by a break below the support level and the downside targets have a high probability of being achieved. This pattern is not on the S&P index.

·         Significant and sudden compression in the long term group of averages in the Guppy Multiple Moving Averages indicator on a weekly chart. This is not seen on the S&P chart. In fact we see the opposite, with the long term GMMA well separated which indicates strong investor confidence.  Additionally the separation between the short term and long term groups is wide and consistent. This is another bullish signal.

A break below a long term up trend line that has been used as a support level. This is a very low probability on the S&P chart with this trend line around 120 index points below the current index value.

 

  

 

·         A blow-off top pattern. This is a buying climax with a dramatic increase in the index value and significantly higher volume.

·         A move below critical support levels. The S&P is making new highs so support levels are difficult to identify. However the S&P has a consistent history of trading in well defined trading bands. These projected levels have acted as resistance and support level. The S&P index retreat from 2400 is also a retreat from the trading band target level. Consolidation around these trading and target levels is common. The trading band support level is near 2260.

·         A large increase in the VIX which indicates the market is expecting a significant change in trend.

A careful analysis of the S&P chart shows no end-of-trend patterns and this suggests that there is a very low probability of a major change in the trend. However this does not rule out the potential for a retracement and consolidation. This behaviour is common in all uptrends and provides a good buying opportunity.

Investors wait for the market to potentially test the lower edge of the short term GMMA near 2300. A rebound from this level is a buying opportunity for a continuation of the uptrend.  A breakout above 2400 has an upside target near 2530. The target is calculated by using trading band price projections – a method we have successfully applied to the S&P to set targets since 2011.


About the Author
Daryl Guppy (Australia)
Known as the “CNBC Chartman”, Technical Analysis Expert, International Investment Master, Daryl is an active private position trader trading equities and associated derivatives markets.

Daryl Guppy is Founder and Director of Guppytraders.com Pty Ltd. He is an active private position trader trading equities and associated derivatives markets. His most recent book is ‘The 36 Strategies of the Chinese for Financial Traders’. He is the author of several books including ‘Share Trading’, ‘Trading Tactics’, ‘Bear Trading’, ‘Chart Trading’, ‘Trading Asian Shares’, ‘Market Trading Tactics’, ‘Better Trading’, ‘Better Stock Trading’, ‘Snapshot Trading’. Several of these books are also available in Chinese & Italian, in particular, ‘Trend Trading’ has become a best seller and is available in Chinese.

Daryl developed the Guppy Multiple Moving Average indicator which is included in DZHI Advisor, Metastock, OmniTrader and other charting programs. He delivers accredited courses for the Singapore Exchange and Society of Remisiers, Singapore. He is an appointed foundation member of the Australian Government Shareholders and Investors Advisory Council. He is a regular technical analyst commentator and guest host on CNBC Asia Squawk Box.

As a technical trader, he relies mainly on chart and live market information to make trading decisions. He is the publisher of a weekly Internet newsletter Tutorials in Applied Technical Analysis, which explains technical analysis techniques and shows how they are applied to current markets. There are Australian, Asia, China and India editions of the newsletter, with each concentrating on local market solutions and trading education.

He is a regular contributor to the Sydney Futures Exchange magazine - Your Trading Edge, the US trading magazines - Technical Analysis of Stocks and Commodities, Active Trader, Working Money, Bridge Trader, Australia's Shares and Personal Investment magazines, Singapore's Smart Investor magazine and The Edge business weekly and Personal Money in Malaysia. He has a regular column in China's Weekly on Stocks magazine and in Shanghai Securities News. He also contributes to Poland's Professional Investor and provided sector analysis on the Singapore, Hong Kong, Malaysia and Philippines markets for i-invest handbooks.

He edited and contributed new material to the Australian editions of the US classics in the International Investors Bookshelf series, The Basics of Speculating and Day Trader's Advantage and Options: Trading Strategies That Work and Trading Rules and Mastering Technical Analysis. He prepared the introduction to the Australian editions of Breaking the Black Box (M Pring), A Technician's Guide to Day Trading (M Pring) and New Thinking in Technical Analysis (R Bensignor).

He provides web content to Sanford online brokerage, Reuters, On Line Trading systems, the Society of Remisiers, Singapore, Asiastockwatch, Telstra Big Pond Money and Quicken, Singapore. He provides charting chat room support and is co-host for the stockmeetingplace traders forum.

He trades from Darwin in the Northern Territory, of Australia, some 3,000kms from the nearest Exchange. As a result he makes full use of electronic advantages to actively trade the market and to keep in contact with other Australian and overseas traders.

He gives conference briefings for brokerage private clients. He is a featured speaker at the Australian Traders Expo, for the Sydney Futures Exchange Conference days around Australia and New Zealand, and at the Australian Technical Analysts Association annual national conferences. He was one of the speakers in the first Australian Equis Metastock seminar series. He also spoke at the On Line Trading Summit in San Diego which was webcast to traders throughout the world, and at the Technical Analysis Trading Forum in Orlando. He has spoken at trading conferences in Italy and France. He has also spoken frequently at all the major Australian Stock Exchanges, and for brokerage firms.

He was one of two foreigners (Jim Rogers and Daryl Guppy) to participate in the 2005 Chinese market outlook conference in Beijing which was broadcast throughout China. He is a keynote speaker at the 2007 China Capital Markets Investment Forum. His analysis has been presented at the 2005 Palm Oil Outlook conference sponsored by Bursa Malaysia and the BYSD Annual conference in Turkey. He is a regular speaker at the annual ASEAN Rubber Conference and at financial trading seminars in Shanghai, Beijing and Shenzhen.

He presents Certified Professional Training modules for charting and advanced technical analysis for the Singapore Stock Exchange and the Society of Remisiers, Singapore and the Hong Kong Securities Institute. He has worked with the Singapore and Australian Stock Exchanges to promote their cross trading link. He worked with Reuters Hong Kong to deliver trading and training workshops. He was the lecturer for the Casuarina Senior College charting course.

He also runs public trading workshops, and equity and futures brokerage sponsored seminars for clients such as National On Line trading, CMC Markets, Beijing SEEC in Australia, Kuala Lumpur, Singapore, Shanghai, Dalian and Paris. He provides in-house training support for fund managers, brokerage dealers and remisiers.

He presented several on-line workshop conferences for Pristine.com and Compuserve Investors Forum. He has appears regularly on CNBC Asia, Squawk Box as guest host technical analyst, Asian Wall Street Journal, Trading Day, Channel News Asia and ABC radio and television.

He was retained as a consultant by several Australian and Singaporean brokerages and financial portals to advise on the development of Internet based brokerage, trading and information services. He is a member of the Australian Technical Analysts Association, the Technical Analysts Society of Singapore and the International Federation of Technical Analysts.


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