After viewing a decade-long and five-year perspective on the market, the next step is to view a weekly chart. I use stockcharts.com, one of the best websites for following the market.
Stockcharts.com.
If you go to stockcharts.com, you will see the home page. On the left side is a thumb-sized chart of the various indicies. The heading above the chart reads "Today in the Market." Below this heading will be four choices: DJIA, NASDAQ, NYSE, S&P 500. Double click on S&P 500. You should see a nice chart of the market's peformance for the past 24 hours. As I type, the market is sitting on support @ 1173. I anticipate that the gap from yesterday's close will be filled. (In other words, the price will go to 1169 before heading back up.)
Now go to the right hand side of the homepage. You should see a column titled "Start to Chart!"
Under "Start to Chart," there is a choice called "Enter a symbol." Type in "$Spx" and hit the button "Go!" You should now see a daily chart for the Standard & Poor's 500 Index.
The Weekly Chart.
1. Directly above the chart you will see a blue button titled "Update." To the left of the Update button is a drop down tab that says "Daily." Click on the drop down tab and choose "Weekly."
2. Scroll down to the bottom of the page. You should see a group of drop down buttons under the heading "Overlays." The first row should say "Simple Moving Average 50". The second row should say "Simple Moving Average 200". You want the third row. Click on the drop down button and choose "Simple Moving Average." Then type in to the right "13."
3. Below Overlays is a final category of choices labeled "Indicators." RSI is in the first row. MACD is in the second row. Go the third row. Click on the drop down tab. Choose the choice "Full Stochastics."
4. Click on the bottom button that says "Update." Viola! You now have a professional quality weekly chart for the market.
Market Conditions On the Weekly Chart.
1. The market has been going up since August 27, 2010. The rise has been non-stop. These conditions are considered "Bullish" which just means the market is going up. Its that simple.
2. Notice the red line. The red line reflects the 200-day moving average of the market. Notice how the red line rejected prices back on April 26, 2010 @1219. The red line is resistance. Resistance just means there is more selling pressure at this level than buying pressure. When there are more sellers than buyers, then the price will go down.
3. We are approaching the red line. The red line is currently @ 1196.52. The red line continues to be resistance until proven otherwise.
4. The red line is sloping downward. This is a bearish sign. Bearish simply means that prices have a bias to the down side. Isn't it interesting that prices can be biased to the down side while prices have been going up for the last month? This is why wise traders say things are most risky and dangerous after a long advance.
5. Traders are not a patient lot. They will reverse positions in a heart beat when the trend changes.
6. There is an open gap @ 1205 from late April/early May. This is a natural target for the market to reach before retreating. I remember in November 2007 how the market dropped the first four days in November like a rock. Then it rebounded spectacularly in three days to close a gap. Once the gap was closed, the market dropped again and made a lower low. Larry Williams has written about this market behavior. There are investors who purchased the market back in April 2010 above 1205 who are eager to get out even.
Conclusion.
The weekly chart tells us that storm clouds are on the horizon. The horizon sits in a zone between 1196 and 1205. When the market reaches this level, it would be wise to move back into the G Fund. Then, we should watch how the market reacts to closing of the gap @ 1205.
Have a good day!
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