Broad Market Overview

By | April 21, 2014

A good way to get started here on the site is to present a baseline overview of the broader market using multiple timeframes. The monthly chart of the S&P 500 index shows a series of cycle highs and cycle lows.
22. RVT spx onthly chart
The 82 period cycle between the 2000 high and the 2007 high marked by the vertical lines suggest the formation of a third cycle high at current levels. Cycle circles mark the cycle lows and while they have little relationship to the configuration of the price action, there is a common angle of the radii of their amplitudes and the phase of the cycles that intersects with the vertical cycle high lines. This lends support to the current cycle high thesis.
The weekly chart uses coordinated crossovers in some basic price momentum and money flow indicators to mark turning points.
22. RVT spx weekly chart
The S&P has been trading in a rising channel since breaking above the resistance line of a rising wedge formation early this year. The relative strength indicator and Chaikin money flow, which gauges money flow based on closing price within a range over a specific look-back period, are overlaid with 21 period moving averages. They, along with the MacD indicator, have made bearish crossovers and, in the past, this coordination in price and money flow indications has seen the index move lower. The market, however, has moved higher since the last bearish signal and continued strength would reverse these indications. Price action is the final arbiter.
The daily chart gives a more detailed view of the price action in the rising channel.
22. RVT spx daiy chart
Two weeks ago the 50 day moving average was taken out to the downside and a key area of support in the 1810 to 1820 range was tested, with the RSI and MacD turning lower and on balance volume dropping below its 21 period average. A bounce followed last week and the price indicators are back above their centerlines and on balance volume is back above its signal average.

Over the shorter term the broader market has seen a sharp reversal and the magnetic effect of new highs on the major indices could power further gains, but intermediate and longer term technical conditions should eventually weigh on the broader market.
Multiple timeframe analysis often presents conflicting scenarios but is a useful exercise because it contextualizes and can help traders decide to push a position or tighten up on stops, take smaller size on a longer time frame to weather potential volatility, or to simply look elsewhere to risk capital.

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