5 Year S&P 500 Chart

I charted the S&P 500 ($SPX) after the markets closed on Friday, March 12, 2010, when the SPX closed at 1,149.99 for the week.

I decided to go with a monthly chart this weekend after having an email conversation with a reader who had a question about the 200 month moving average from a chart I posted last July.  Back then the SPX was fighting to get back above its 200 month moving average.  This week was pretty good timing to come back to look at the past five years of monthly prices because the 10, 100 and 200 month moving averages really stand out.

For the past six months the SPX has been sandwiched between the 100 and 200 month moving averages.  Friday’s intraday high marked a new 2010 high, but the resistance from the 100 month moving average could prove to be a rally stopper.  This level, near 1,150, is going to be crucial to watch.  I’m not saying the SPX can’t get above this range, but before you jump in with both feet it might be worth waiting for more than just a few confirmation days.  A move above 1,200 would be enough to turn me more bullish, but I wouldn’t be surprised to see another move back down to the 200 month moving average (around 1,050) again before that happens. 

A drop back down to the 200 month moving average would be approximately an 8.5% drop for the SPX which is more than we’ve been accustomed to for the past year on dips, but isn’t out of the question after a year of rallying without a full 10% correction mixed in.  If the S&P 500 starts to drop it could find support at the 10 month moving average again, just as it did in February when the index found support at both the 10 and 200 month moving averages around the same level.

I only drew one trend line in this chart.  It was the trend of lower highs, but broke for the SPX to move sideways a few months ago.  That same line acted as support last month and could come into play again as potential support as a trend line of lower lows.  That might be asking a bit much from this line, but I didn’t see many other trend lines worth discussing.

The Williams %R indicator is definitely worth watching for the monthly view.  You can see (especially on the 28 month indicator) how %R issued a sell signal when it dropped below overbought at the end of 2007.  More than a year later in the spring of 2009 %R moved out of oversold and those paying attention knew to get in again.

Next week is triple expiration for options.  Sometimes that can make for an interesting week of trading.  Throw in the resistance from the 100 month moving average and it becomes pretty exciting.  I think we have a long way to go before the bigger bull run ends, but I expect some decent dips to hit along the way and possibly sooner than later.