Black Friday and the S&P 500

• Posted by Greg Harmon
• on November 25th, 2016

Today will be one of the slowest days of the year in the stock market. Nobody on Wall Street wants to go to work. And if not for a rule that the stock exchange cannot be closed 4 days in a row I suspect that all parties would happily give it as a holiday. So it is a good day to step back and reflect on the market, and not trade. Go participate in Black Friday, eat 2 (or more) leftover turkey sandwiches, but do not trade. The market will be there on Monday.

Stepping back for me most often means reassessing the long term picture. And as a technician I do it by looking at charts of price action. The chart of a stock or index’s price has a lot to say. It is a road map of investor psychology. It is a history of the battlefield skirmishes played out between buyers and sellers on a daily basis. It shows you where all the pressure points are and how they resolved.

So when I look at the chart of the weekly price action in the S&P 500 since the 2011 low it sings out to me. With just two simple lines on it to help explain, this is a very bullish chart. The Andrews’ Pitchfork is a simple tool to discern a trend. This one in the chart above shows the pullback into the low in early 2016 and then a bounce. And since then the S&P 500 is riding higher between the Median Line and a 50% pullback from it. Steady rising price action.

The 40 week Simple Moving Average, roughly equivalent to the 200 day SMA, is also a simple indication of strength and the most basic indicator of bullish or bearishness. And the S&P 500 has stayed above that line since it reclaimed it in March. There is no weakness in this market. It had a long correction through time, and now appears ready to resume its path higher.

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The information in this blog post represents my own opinions and does not contain a recommendation for any particular security or investment. I or my affiliates may hold positions or other interests in securities mentioned in the Blog, please see my Disclaimer page for my full disclaimer.

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