We here at Stocktradersbulletin.com has taken a closer look at the S&P 500 to see if we can find any indications of what could come the next years. We build this analysis on daily data dating back to 1970 up until now. By looking at the market in such a big scale easily overlooked signals in our typical day- bar display can be identified. Therefore let us now take a closer look at some of the immediate things we see. Important support and resistance levels are easily identified. The 380 level played a major role throughout whole of 1991 (please note that the use of the word "level" in this article do not mean the spesific number but more a range around that specific number). The 630 level was important part of 1996 but now the more interesting levels come into play. In 1997 the 806 level was broken and must be seen on as very important. In 2002-2003 this level was about to be tested again. S&P 500 ricochet of the level and this was the beginning of our last big rising wave that ended more or less in 2007. The interesting thing is that the level was "active" again end of last year - beginning this year. The level failed for a short period of time but the resent positive market development we have seen S&P 500 is now well above 806 again. Before going any further with this level we need to look at the higher levels also. If we see S&P 500 break out from the 982 level it must be regarded as very positive. 982 could be the first major test for S&P 500 to see if the market will rise of fall again in the time to come. 1200 is not that important level at the moment so we jump straight to the 1550 level. 1550 was first tested in 2000, in 2007 the level was tested again. As we see both times it failed and there was a pullback to 806. This brings us back to the important 806 level. We clearly see a double top formation developed. As we all know a double top is a reversal formation where the distance from 806 to 1550 (744) is the potential for the pullback. This is of course just the general idea about double tops and we should be careful to use that as hard fact. Another possibility is that we see S&P 500 rising above 982, reaching 1550, pulling back to 806 forming a triple top. These formations are also relatively common but for now it is too early to say if this is very realistic or not. If we choose to be optimistic we can see that today's situation looks quite similar to what we could see end of 2002 meaning that the market is just about to start on a new rising wave.





RSI
Looking at the RSI chart we see that the low values seen the last few months has not been seen many times since 1970. 2002 and 1974 with 1974 showing the lowest value is what we can find. What is also showing well is divergences between RSI and S&P 500. E.g. we see an RSI top in 1995 bottoming in 2002 while S&P 500 is still rising topping early 2000 before turning downwards. RSI do not give us many indications of where we are heading right now but what we can say is that the market has been/ is  what we call "oversold". The RSI values are not down at 30 (typical value indicating oversold) this is mainly due to the use of 200 day RSI and not the typical 14 day RSI setting. Therefore do not pay too much attention to the actual RSI value seen here but do pay more attention to the historical RSI tops and bottoms seen in the chart. If we agree that the market is now oversold then we could be facing a new positive development and if we choose we could agree that RSI is about to leave the low for now.  

ADX
Looking at +DI and -DI we can identify some interesting patterns. When +Di and -DI are "dancing" the market are moving more or less healthy. What we seen today is that ADX is quite high while +Di and -DI are separated quite a bit. +Di and -DI seems to be moving towards each other again meaning we are moving towards a more healthy market but it could still take some time before we are on safe ground.

Smaller scale
If we take a closer look at the movement seen from last top up until now we also find various important support and resistance levels in addition to those talked about earlier. The main extra ones are 881, 1121 and 1381. 881 has already been broken but where the first real test will be at 982. If 982 is broken we could see a much more healthy market development the time to come but for now what we can say is that it still looks quite risky but where we also see clear improvements.






To sum up what can be seen on a larger scale is that the market looks more positive than i a long time. RSI is indicating an oversold market but we need to remember that a market can remain oversold for some time before it rises again. On this scale though it seems that the RSI lows are present at relatively short time intervals. +DI and -DI is indicating that the market is improving but the danger is not yet over. The risk is still quite high. If the 982 level is broken we could probably say that we are on a much safer ground.