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S&P500 Index 4H Chart 9/26/2012 9:45AM EDT
The QE3 boost for equities has been fading as the S&P 500 continues to slide from a high of 1474.25 on 9/14, 2 Fridays ago. This reflects the fact that the market has already been pricing in QE3, also known as QE infinity for its open-ended structure.
Overbought; regression to mean: In the 4H chart, you can see that price was at the upper bollinger band. (I have bands at 3 standard deviations from the 200 simple moving average). Along with the RSI above 70, this shows an overbought market in the short-term, although the medium term mode is bullish. It has been regressing back toward the 200-4H SMA in a declining channel, speeding up now during the 9/26 US session and breaking below the channel support.
Momentum change: Note the 4H RSI reading breaking below 40 and tagging 30. It has remained above 40 aside from some brief moments of violation throughout August and September so far, so a break below and a tag of 30, shows a change away from the preceding bullish momentum.
Possible support: The next focus now is the 1420-1425 area, which contains the 1421.20 and 1424.25 pivots as well as the 200-4H SMA. As noted above, the 200-4H SMA represents the mean in the 4H time-frame, and a regression back to it means the market is neutral. A break below these possible support factors open up the 1400 psychological handle, and a rising trendline that goes back to June 1 where a bull run from 1261.75.
S&P500 Index Day Chart 9/26/2012 9:50AM EDT
Fan Yang CMT is a forex trader, analyst, educator and Chief Technical Strategist for FXTimes – provider of Forex News, Analysis, Education, Videos, Charts, and other trading resources.
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