Technical Outlook for the S&P 500

What you see above (click to enlarge) are 2 different views of the same daily chart, that of the S&P 500 index. The first has the following indicators: 20, 50, 200-day moving averages, slow stochastics and volume. The second is the naked candlestick chart with the RSI indicator. I like this layout as opposed to cramming all these indicators on a single chart, which usually renders the information unreadable (unless you hook up your computer to a $160,000 Sharp 108-inch TV).

We are at this very moment hovering around the 1085 support that held throughout last November, right before the December/January liftoff. Whether it will hold is anyone's guess. [As a humble aside, technical analysis shouldn't in principle tell you what the market WILL do (that would be divination) but what it is likely to do. It's then up to the trader or investor, informed by the TA, to make appropriate bets.] The RSI and the stochastics have reached levels that stopped all previous sell-offs since the start of the bull move in March 2009, so a rebound from here would not be surprising.

That's on the plus side. On the minus side, the S&P 500 has broken below its 20 and 50-day moving averages and is sitting under a big round number, 1,100, that has forcefully rejected yesterday's rally attempt. So unless the market manages a serious rally in the next few days (preferably today or tomorrow), the odds of a prolonged sell-off will increase significantly. And if a sell-off does materialize, look out below: next support is basically at the 200-day moving average, clocking today at around 1,010.