S&P weekly chart - 6 Dec 08

Despite posting the biggest number of jobs decline in nearly 34 years and the declaration of recession in the US earlier in the week, S&P managed to hold strong around the 800 region. In fact S&P closed higher on the last day of trading even after negative jobs report.

If you see the long term historical chart, S&P around 800 is also the level of support after the dotcom bubble in year 2000. The next important psychological support level should be around 250 after the 1987 crash which is a level that we don’t wish to see.



Let us look at the latest S&P weekly chart. RSI(14) is at oversold level and the indicator is showing positive divergence which signals a reversal soon. MACD histogram is also signaling a weakening downtrend and positive slope is forming which suggests a reversal. Again MACD line is at complete oversold level. It is about to turn and cut the MACD signal line from the bottom. You may wait for the cut to happen as confirmation of a reversal.

In my opinion it seems market has factored in all the negative and recessionary news. It is time to look forward to the economic recovery process and do some bargain hunting if you have not done so previously.