S&P 500 Technicals – Onward to new highs

S&P 500 feels like the lesser sibling compared to Dow Industrials in recent weeks. While the Dow was basking in glory after clearing record highs after record highs, S&P 500 was still staring at its own bar unable to push higher. Traders were concern on the difference in fortunes, and were worried that this divergence may be a signal that the stock market may unravel in later stages in 2013.

However, S&P 500 has finally done its investor parents proud, with its own coming of age on Wednesday as prices closed at its record high. This spurred bulls to push price further higher on the back of surprising decrease in Jobless Claims yesterday. The better than expected employment data pushed S&P to a high of 1,597.35, though price closed slightly lower at 1,593.37 by the end of the trading day.

Hourly Chart

Futures market during after hours (Asian hours) failed to hold onto the closing levels, with price trading back below 1,590 to the top of 11th April consolidation ceiling around 1,588. Price is finding some support along rising trendline which is currently the confluence with the same 1,588 ceiling. Stochastic readings are heading lower though price is likely to enter into Oversold regions before it can reach the next level of significant support around 1,570. On the other hand, curren reading levels are below all the troughs formed this week, suggesting that current decline may be a little bit overstretched according to Stochastic Indicator. This improves the likelihood of current rising trendline holding.

Daily Chart

Daily Chart shows price trading within a Channel, however relevance of Channel on current price action is suspect with the Topside not having tested ever since the 1st break towards Channel bottom. Stochastic readings are entering into Overbought region, however readings are showing a divergence with overall readings having lower peaks and lower trough while price having higher highs and lows. There was a bullish divergence signal back on 8th April with the rebound from Channel bottom – coinciding with lower Stoch trough which was further confirmed by 10th April’s break of 1,570 ceiling. If the signal proves to be right, the likelihood of price moving to test Channel top will be higher against a retest of Channel bottom once more.

Fundamentally, there are good news for stocks. GDP growth for US is expected to be 3% in 2013, and S&p 500’s new highs will help to spur short-term bullishness. Fed’s minutes showed majority dovishness within FOMC, which means easing is likely to continue. However it is also clear that some risks of QE stopping remains with a handful of voting members expressing their desires to cut down on QE3 purchases within 2013. Hence the fact that S&P 500’s coming of age despite such woes become all the more significant, and highlights the underlying bullishness market is having. Rightly or wrongly, the market is looking to be more cheerful, and if we manage to close tonight on or close to weekly/historical high for both Dow and S&P, the bullishness and feel good factor can easily spillover to next week for further advancement higher.

More Links:
EUR/USD – Moves to Highest Level in Six Weeks Near 1.3150
USD/SGD – Singapore GDP shrinks 0.6%, MAS silent
AUD/USD – Aussie Pushes Higher as 1.06 in Sight

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