Stock Market Concern: S&P 500 at risk?

Currently, the S&P 500 (using index $SPX) has traded the last few days underneath the 50 day moving average, which is bearish. However, it has not gone below support of around 1488. Just by looking at these two levels, the S&P 500 could trade between resistance and support.

However, there are some things to be concerned about.

• As the S&P 500 hit both recent tops, the number of S&P 500 stocks that are above their 50 day moving average has decreased. Currently, only 40% of the stocks are above the 50 day moving average. All of these are not good signs. (In a later post, we can discuss in more detail using the $SPXA50R as a contrarian indicator. If the $SPXA50R goes too low, that might be a bottom). In the chart above, the $SPXA50R is listed in upper window.
  
• Williams ADX is a technical indicator to evaluate the strength of the current trend. In the chart above, the Williams ADX is in the lower window. The Black ADX line says whether the stock is trending or not. Readings below 20 mean there is a weak trend, and ADX above 40 is a strong trend. In the case above, the ADX line is rising up from under 20 and is moving above 20, suggesting a strengthening trend.
  
• Using William's ADX, when the Red -DI line goes above the Green +DI line, that is generally a sell signal. Of course, this line should not be used by itself. There are many systems which use the +DI/-DI crossover, and many try to keep the trader from getting whipsawed in and out of an index or stock. The crossover often is used in conjunction with the ADX line. In the chart above, we do see the -DI line going above the +DI line, and the ADX line looks to be rising to the 20 level, which suggests a bearish trend may be strengthening.
  

In conclusion, the S&P 500 is stuck between the 1488 level and resistance is the 50 day moving average. Trading underneath the 50 day moving average for several days is negative in itself. While the $SPX has not breached the resistance level with good volume, there are still different concerns with the market based on the negative divergence using Stocks Over the 50 Day Moving average, and Williams ADX.

If the levels don't hold, then maybe the predicted ABC correction may still occur.

Current Chart Update

To look at the chart on a day to day basis, use this link.

Finisar (FNSR), a speculative under $4 stock looks like it was forgotten, but may now be poised to move upwards.

FNSR's 50 day moving average has gone above the 200 day moving average, the Golden Cross, and is a Bullish sign. FNSR is both above the 50 and 200 day moving average, and is currently in an ascending right triangle, a normally bullish formation. This pattern suggests accumulation by people as the stock moves lower, and the buying support increases each time, forming higher lows. Before the end of the triangle approaches, the stock may breakout with good volume above resistance. This would be an ideal Buy Point.

Other clues include a Bollinger Band Width of less than 0.5 which, in the past, has predicted a move in the stock (whether up or down).

The lower technical indicator is the Williams ADX Directional Movement Index. This is a trend following indictator. The Black line through the middle is the ADX. If the ADX is rising upwards, that means the stock is starting to trend. When the green line (+DI) goes above the red line (-DI), and when the green line is rising, and the red line is falling, that would be one of the buy signals. Note that great care has to be taken using this technical indicator. If the stock is not trending, using the red and green line crossover by itself could cause a lot of stock whipsaws. That's why the black ADX line is important in the system. There are many modifications to this system to reduce whipsaws.

In other words, watch out for the speculative stock Finisar (FNSR) as it may be ready to make a move upwards.

To see a real life example of a breakout of an Ascending Right Triangle, see the Chart of Hansen (HANS).

To monitor FNSR using the same metrics as my chart above, you can use this link.