Bulls on Brink as S&P 500 Makes Third Pass at 200-Day Average
June 15 (Bloomberg) -- The rally in the Standard & Poor’s 500 Index above its average level in the last 200 days is captivating Wall Street for the third time in two weeks.
The benchmark gauge for American equities gained as much as 2 percent to 1,111.76 as of 2:55 p.m. in New York, exceeding by 3 points the level considered significant by investors who base trading decisions on chart patterns. The S&P 500 increased to near the 200-day mean on June 3 and May 27 before losing as much as 5 percent in the next two days.
Technical levels are affecting trading in the absence of earnings and economic news and take on more influence as traders fixate on them, said Peter Sorrentino, who helps oversee $13.3 billion at Huntington Asset Advisors in Cincinnati. The S&P 500’s failure to hold above 1,105, its intraday high the day before May’s employment report spurred a 3.4 percent plunge, was cited in the index’s drop yesterday as it erased a 1.3 percent early rally.
“No one disregards technical analysis now,” said Sorrentino. “If they do so, they do so at their own peril. Technical analysis has become increasingly important because of so much money chasing around. The momentum of money has become more important than the fundamentals beneath it.”
Recovery From Plunge
The S&P 500 tumbled as much as 14 percent from a 19-month high on April 23 through June 7 as concern grew that Europe’s debt crisis will derail the economic recovery and BP Plc’s leaking well in the Gulf of Mexico triggered the worst oil spill in U.S. history.
Equities rallied today as an 11th straight month of growth in the Federal Reserve Bank of New York’s manufacturing gauge added to evidence the economic rebound is weathering the European debt crisis. The S&P 500 has rebounded 5.7 percent since June 7 as concern over European budget deficits eased and investors speculated growth in China and the U.S. will bolster the global recovery.
“The bulls are slowly starting to wrestle back control,” Christopher Verrone and Nicholas Bohnsack, technical analysts at Strategas Research Partners in New York, wrote in a note to clients today.
More than 50 percent of New York Stock Exchange-listed shares have risen above their 200-day moving averages, Verrone and Bohnsack said. The Dow Jones Transportation Index, Nasdaq Composite Index and Philadelphia Semiconductor Index are among other benchmark gauges that have topped their 200-day moving averages in recent days.
‘It Means Something’
The S&P 500 closed below the 200-day average on May 20 for the first time since July 2009 and remained under the trend line for 16 straight sessions before today.
“To the extent of people looking at this, it means something,” said Michael Shaoul, chairman of Marketfield Asset Management, who oversees $770 million and whose flagship fund beat 97 percent of peers over the last year. “It doesn’t tell you that this correction is over, but I think people would look at it as a plus and it would set up the test of the next resistance, which most people would say is at the 50-day moving average.”
The S&P 500’s 50-day moving average is 1,143, about 3 percent above today’s level, according to Bloomberg data.
Reply With Quote
Originally Posted by winner69
Bookmarks