Market is in Consolidation
Written by Sidney on December 13, 2009
The S&P 500 index continues its consolidation pattern since hitting the 1,100 level back in mid October 2009. We believe that in the absence of any major news, the consolidation pattern is likely to continue going into the end of the year.
Technical analysis of the S&P 500 index shows that the chart is working its way into a triangle, with the 50 day exponential moving average providing support, and the 1,119 level providing resistance. This resistance was the index high set on Dec 4, 2009. We expect the consolidation to continue into the new year, when new impetus, particularly from Q4 earning reports, will help set a new direction for the market.
We remain concerned of the bearish MACD divergence – the MACD has been on a decline since peaking in August 2009, while the S&P 500 index has continued to climb. Although the divergence in itself does not make us bearish, it is useful as a preliminary signal of any trend reversals.
S&P 500
A bearish signal is triggered if the index falls definitely below its 50 day exponential moving average, while a bullish signal is triggered if the index breaks above its 1,119 resistance level.
Good luck trading into the new year! 
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