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S&P 500 in Solid Uptrend, MACD Generates a Buy Signal

David Becker
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S&P 500 in Solid Uptrend, MACD Generates a Buy Signal

The S&P 500, S&P MidCap 400 and S&P Small-Cap 600 are all in uptrends, and the S&P 500 remains the clear leader. Although the relative weakness in small and mid-cap stocks is dragging on the larger cap indices, they have still not derailed the uptrend. The results will either be that small and mid-caps break down and drag large-caps down or small and mid-caps catch a bid and start outperforming again. Recent history and seasonality suggests that small and mid-caps may start outperforming in November or December.

Since the 8% correction in May-June 2013, the index has been rising in a slow and steady manner. Corrections have been limited to 4-6% and there have been five such pullbacks in the last 15 months.

The S&P 500 is currently at a 52-week high and in a clear uptrend. The summer low and lower trend line of the rising channel mark support at 1900. The Commodity Channel Index (CCI) moved into positive territory in December 2012 and remaining positive for over 18 months. Target resistance can extend the upper trend line of the rising channel. The line hits the 2090-2100 area at the end of December. The MACD on the SPX has also generated a buy signal. This occurs when the spread (the 12-day moving average minus the 26-day moving average) crosses above the 9-day moving average of the spread.

The S&P Small-Cap 600 working is way higher in 2014, but underperforming the S&P 500 over the last six months or so. A similar situation occurred in 2012 when the index underperformed from late January to late July. Despite relative weakness, the $SML moved higher during this period and did not reverse the uptrend. The index then accelerated higher as the price relative ratio broke out in December 2012.

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