The S&P 500 finished 3.03% higher for the week.

Photo by Jemal Countess/Getty Images

The S&P 500 saw two small losses and three strong gains and as a result added 3.03% for the week erasing the previous week’s losses. The index has increased in two of the past three weeks but has still finished lower in 16 of the past 27 sessions.

The market began moving higher Friday after a good jobs report, but gains turned to losses before the session close as the indexes retreated from earlier resistance levels. It seems possible that investors are not seeing reason enough to move stocks higher as news during the past week was better, but still not great.

Other than a Greek debt story that seems likely to end in a large default, most news seemed to appease investor’s willingness to buy into recent retreats. Stocks appeared to react to earnings reports that were somewhat better during the week. Automotive manufacturing and parts suppliers continued to be one of the few bright spots in this earnings season. A few others reported fairly large beats on expected earnings and increased on the prior year same quarter earnings, something that was missing in many of the earlier reports. There were fewer misses than earlier too.

Overall the majority that beat still did so by small margins. Year over year earnings increases that fell short of stock price appreciation resulted in upticks in trailing twelve month P/E ratios in many stocks. Although some companies increased forward guidance, many companies continued to forecast lower guidance making these P/E upticks more of a concern.

Layoffs continued to be a part of future plans in many companies. The numbers of companies reporting these decreases are still higher than normal, but the overall numbers expected to be effected by these layoffs decreased somewhat compared to the earlier reports.

Oil continued a torrid rebound and the dollar slipped a little during the week. Both seemed to incite investor appetites for stocks, but both are probably mistakenly seen as positives by investors.

A rebound in oil could help energy sector stocks that have slid deeply, but is probably more of a bearish than bullish indication. A continued rebound in energy would fall against the normal commodity cycle that leads into a cycle of increased earnings growth in the majority of stocks later. Without a sustained fallback in energy prices, overall earnings growth is likely to suffer later.

Although a large increase in the deficit was seen in December, it does not appear to be dollar value related as many claim. According to the not seasonally adjusted reports available from the Department of Labor’s Bureau of Economic Analysis; the increase in imports was mainly due to a very large increase in petroleum imports with the month over month change in petroleum accounting for over half of the increase. This increase is not uncommon and went to levels normally seen during the winter months, but the large increase was aided by a very large drop off in petroleum imports during November. The increase in imports was probably also misread by energy sector investors as an abnormally high increase in month over month demand, and not a return to normal seasonal levels from the huge drop off seen in the prior month. This increase normally slides dramatically as the weather warms, and this can be expected in the coming months.

The bulk of the remaining increase was mainly due to a large increase in imports of services. This large increase in services was mainly seen in travel providers and travel service providers and was probably the result of an increase in holiday travel, making it seem it was also probably not a sustained increase.

Exports decreased in December, but a decrease in US exports during the fourth quarter is nearly always seen, a month over month decrease between November and December has been seen in all but four years since 2000. The month over month decrease from November to December 2014 was smaller than the decrease seen during the same period in 2013, and less than the average since 2000.

Despite the rhetoric to the contrary, review of the historical data shows that excluding energy, the rate of increase in the trade deficit declines into a strengthening dollar and although the deficit continues to climb, the rate of ascent is far less than during weakening dollar periods. The rate of increase in export value also tends to increase into a stronger dollar and the rate of increase in import value tends to decrease, exactly the opposite of what many believe.

There are several reasons for this, with the largest factor being exactly why many believe a weak dollar increases exports. The US gets paid more for exports and pays less for imports. Much of the US exports surpluses have a cost based in dollars, as the dollar strengthens these exports are worth more in comparable foreign trade currencies and since they are priced in dollars, the price increases are seen worldwide, making them marketable regardless of the dollar’s value. The higher value in foreign currency offsets part of the already reduced cost of these imports.

The strong dollar means imports cost less, reducing the base cost of these imports but also reducing the cost basis of the inevitable increases seen later, which tends to reduce the rate of increase. In the longer term the weakening of a currency also causes production shifts as companies move production into strengthening currencies. A strengthening in the dollar tends to bring some production back to the US, whereas a weakening in the dollar sends this production elsewhere.

There are several reasons for the production shift, but some of the largest factors include that it negates currency exchange earnings losses. It also reduces production costs due to lower raw material costs; remember materials are priced in dollars so they cost more in weakening currencies. Finally there are cost reductions seen in logistics; it costs far less to ship across the country than import it from across the ocean and then ship it across the country. Shipping travel times are also reduced thereby reducing work in process costs, although the product may have left the factory floor, shipping times are often considered as part of this cost due to not being paid until the product is delivered.

This shift in production is beginning and part of the reason for a strengthening in the US workforce. It is also one of the reasons many other countries are seeing workforce declines. Since these products are now made in the US and no longer imported, it tends to further decrease the overall value of imports. Although China and some other countries have continued to see large increases in exports to the US, many countries are seeing large decreases due to this production shift. In the long run, a continued strengthening in the dollar is likely to slow the increase in the deficit.

Regardless of the dollar’s value, without major trade reform and substantial taxes on US Company’s foreign incomes the trade deficit is not likely to ever be reduced. Most politicians believe the wrong things will help the US economy due to widely held misconceptions.

The index charts of the Dow Jones Industrial Average. S&P 500. NASDAQ. New York Stock Exchange and Russell 2000 all rebounded strongly during the week and all have reached fully overbought conditions in this rebound. All also appeared to fail in these rebounds at or near previous resistance levels

The Dow Jones rebounded from the lowest level reached so far in the pullback from its Dec 26 high on Monday, which was also lower than the Dec 16 low. It broke slightly below the 200 EMA in this drop before rebounding strongly to finish the session with a gain. The rally continued with a large gain on Tuesday that broke back above the 13 and 50 EMA and was followed by a slight gain on Wednesday. Thursday saw another large gain as the 13 EMA broke bullishly back above the 50 EMA. Friday started higher but found resistance near the Jan 8 high the index had fallen from in a previous drop, turning fairly steeply lower off this high late in the session.

The S&P 500 fell to the deepest level in its pullback from Dec 28 highs intraday on Monday. It rebounded bullishly from that drop but was capped at the 13 EMA just as the previous two sessions had been. Tuesday pushed higher breaking above the 13 and 50 EMA and finished near session highs before Wednesday took nearly half those gains back. Thursday pushed strongly higher again finishing near session highs and near resistance that had sent it lower in two previous rebounds. Friday continued higher early in the session, but fell fairly steeply lower late in the session before breaking free of this resistance.

The NASDAQ also fell more deeply on Monday before turning higher. The intraday low rebounded above the Jan 16 previous cycle low and rebounded strongly to finish the session slightly above the 50 EMA. The NASDAQ saw a fairly large gain on Tuesday and Thursday and a small loss on Wednesday before Friday pushed to the highest levels on the index this year, and then fell steeply as it near the resistance near 4800 that turned the index lower Dec 28.

The NYSE also slipped Monday, but fell more in step with the previous drop and rebounded above both the previous two cycle lows in this drop. The rebound was fairly strong and finished slightly above the 200 EMA, but provided little gain for the session. Tuesday opened with a large gap higher and continued strongly higher starting the session above the 13 EMA and continued higher above the 50 EMA to finish near session highs, but Wednesday opened lower and continued to fall before rebounding at the 50 EMA and finishing a little higher. Thursday again gapped at the open and continued to finish with a fairly large gain. Friday pushed slightly higher but appeared to be turned lower at the trend line established off November and December highs.

The Russell fell steeply Monday before finding support near the 200 EMA and rebounding slightly above the previous cycle’s Jan 16 low. The rebound was strong but was snubbed at the 50 EMA. Tuesday opened with a gap higher that finished near session highs and a fairly large gain, Wednesday slipped for a small loss before Thursday gapped higher and finish for the first time this year above 1200, but Friday’s gains were turned lower before reaching the Dec 29 highs that the current downturn began from.

All but the NASDAQ left an unfilled gap in Tuesday’s open and all left a hidden unfilled gap in Thursday’s open. All the indexes appeared to stumble as they reached likely resistances on Friday. All are overbought. Many stocks appeared to find the same types of stumbling points in rebounds they were in during the week and most stocks have reached fully overbought conditions. Some of the earnings reports during the past week gave reason to be cautiously optimistic, but overall earnings appear to be falling short of the run up in stock prices over the past year, pushing TTM P/E’s higher into reduced earnings forecasts by many companies. The jobs report was good, but to this point, the earnings reports are showing more companies than normal are planning layoffs in the year ahead. Normal trends would indicate that a bullish period is on the horizon after stocks leave this rough patch, but the recent rebound in oil leaves this normal trend somewhat in doubt.

The 20 year US Treasury Bond saw four losses in the most bearish weekly decline in the current trend higher. The 20 year slipped slightly Monday before Tuesday gapped lower and continued to fall below the 13 EMA with the first finish below the 13 EMA since Dec 24. Wednesday opened lower but rebounded to finish slightly above the 13 EMA. The drop continued on Thursday and Friday with both sessions opening with gaps lower as the 20 Year finished at the lowest level since Jan 9. The 20 year saw two headwinds in the past week as stocks saw a bullish rebound and the US dollar slipped slightly in its recent climb largely due to oil based rebounds in several currencies. The slip in the dollar probably got some foreign investors to take profits and some investors took profits and went back into the stock market rebound. Even though oil continued to rebound Friday, the dollar saw strength return during the session. The 20 year is oversold, stocks are overbought and there is still plenty of worry in markets outside the US with most safe haven Treasury assets paying much lower rates. The current move looks potentially bearish for the 20 year, but there is reason to believe it could rebound.

Long term treasury charts saw potentially bearish moves lower, but the drop left reason for a rebound. These charts were somewhat bullish for stocks in the past week. If oil continues to rebound, it will probably continue to pressure the US dollar and a turn lower in the dollar could increase selling of foreign investments in US Treasuries. If oil’s rebound falters, it seems likely the dollar could continue higher against most currencies, and this could shift these investments back to Treasuries.

The interest rate on the 10 year US Treasury Note finished the past four sessions with gains as it moved strikingly higher. After seeing Tuesday’s gap higher continue until it was stuffed at the 13 EMA, Wednesday continued higher for the first finish above this level since Dec 26. Thursday edged slightly higher before Friday saw a large push higher that saw the highest close since Jan 9. The Ten Year Note move higher looks bullish, but it has seen similar quick rebounds in the current trend lower fail. This rebound was strong, but many things could change its direction. Even so, the rate on the Ten Year Note seems much lower than it probably should be.

Gold dipped to about 1280 early in Sydney trading Sunday night. It trended within two points higher and one lower of this dip for the remainder of the night and finished the day a little over 1280.

Monday saw a downtrend develop early that carried gold down to 1267 during London trading. It began a rebound from this low that reached about 1282 in New York, but the rally fizzled and gold slipped back to about 1274. It traded flatly within about a point or two higher or lower of 1274 into the days close a little below 1274.

Tuesday began with a rebound in Hong Kong that reached about 1285 by the London open. Gold bounced lower off that high until starting a steeper descent in a break below 1280 before the New York open that fell all the way to 1256 by late morning in New York. It rebounded to about 1267 in New York but then trended lower again to about 1258 in Hong Kong. Gold reversed again trending higher to finish the night a little above 1264.

Wednesday trended higher mostly in bounces after the London open that reached a high of about 1271 in New York before turning sharply lower to 1261. It bounced slowly higher before pushing more strongly higher before and into the Sydney that carried gold back to about 1273. It flattened within a couple points lower of that high before the Hong Kong and into the day’s finish of above 1271.

Thursday saw gold push to about 1273 early in Hong Kong before beginning a trend lower to about 1259 in London. It rebounded to about 1264 shortly after the New York open then retested the earlier low in a drop to 1258 and after a short rebound another drop to 1257. Gold trended back to about 1267 before leveling out within a couple points higher or lower of 1265 into the day’s finish above 1265.

Friday saw gold push to about 1269 in Hong Kong then trade flatly lower into a New York open of about 1265 that fell steeply lower to a late morning low of about 1229. Gold traded mostly within 1230 and 1235 into a New York Spot close of 1233.30 and much lower than the previous week’s New York Spot close of 1283.30.

Gold fell to the second consecutive weekly loss based on the New York Spot close. If recent selloffs seen in gold and treasuries continue, they are potentially bullish for stocks.

The S&P 500 Constituent Charts

Many of the constituents that moved higher during the week reached likely resistance levels and stalled in climbs at these levels. Many of these stocks are in or near overbought conditions; making a trend lower off these resistances seem likely.

There were a fairly large number of constituents that broke considerably lower on Friday finishing near session lows. Some fell to rest on support levels, but several others shattered support levels in these retreats. It seems likely these stocks could continue lower and added downward tension to the index.

Many constituents that have established downtrends were unaffected by the past week’s rebound in stock prices and continued lower within these trends. Others rebounded to likely resistance like trend lines or moving averages and backed off in Friday’s retreat.

The past week’s rebound appeared to have minimal constituent support. There were relatively few stocks that moved considerably higher, but due to the large moves higher already seen, additional upside in these moves appears limited. Many of these stocks gapped higher in these runs, some have seen several gaps in recent moves higher. Many of these stocks are overbought and many already appear to have turned lower at likely resistances. Many of those that have not yet turned lower are near levels they could turn lower at. Some still appear to have additional upside, but the numbers appear too few to carry the index higher with them.

Although too early to tell for certain, nearly all indicator stocks across many sectors broke substantially lower during the past week, with many seeing lower prices into the relatively bullish overall move higher in stocks. There were a few exceptions that pushed higher into the recent stock rally, but they came off recent lows and were oversold, but are reaching areas that they could turn lower again at. These stocks often break lower earlier than the overall market in downturns, and higher than the overall market in upturns. Although timeframes vary, they can lead into downturns by up to six weeks. Many of these stocks had already turned lower earlier, but at that time looked to be in normal trends off recent highs or within normal seasonal trends that carry these stocks lower.

Several constituents reported earnings that beat expectations, but guided lower in the coming quarters. Although it is normal for guidance to be conservative during the fourth quarter earnings reports, lower guidance seems to be more prominent than normal in earnings reports this quarter. Not all stocks are guiding lower, some are guiding higher, but these numbers seem fewer than normal too. Overall few stocks appear appealing at current prices.

Even after a bullish rally on the index, few of the constituent’s charts look bullish. There was a very high incidence of opening gaps higher in the past week’s run and these gaps will likely be filled at some point. Many that gapped higher have a history of filling these gaps fairly quickly, often in the very next turn lower. Many stocks appear to be turning lower from likely resistances and are overbought. It seems possible the index could continue to retreat from the recent downturn at resistance.

The indicators featured below are not always correct, but they have been many times. Being so they are worth reading about and taking note of.

The +2% L, -2% L, -/(+)9 Day, -/+ 9 Day, and 100 L indicators are currently active. See a more detailed description of most of the indicators developed through research and featured in these articles here.

The +2% L and –2% L indicators did not provide a correct indication in the past week. These indicators would normally return to a dormant state if there are no volatile conditions seen in the week ahead, but due to the following week falling within the fringe area of an upcoming 90 E, these indicators will instead return to a high level. Current conditions make it appear possible the 90 E could be bearish.

The -/(+)9 Day indicator that became active on Oct 30, 2014 will enter its expiration period in 10 trading days. This indicator has performed as follows to this point in the standard format: highest close / lowest close / last close.

+4.81% / -1.10% / +3.50%

The 9 Day indicator that became active on Nov 20, 2014 has an expiration period that overlaps with that seen on the Oct 30, 2014 indicator. As a result the index will be within the influence of a 90 E indicator for 42 consecutive trading days. This indicator has performed as follows to this point in the standard format: highest close / lowest close / last close.

+1.84% / -3.90% / +0.13%

Monday opened higher at 1996.67 but retreated to a low of 1980.90 before rebounding to a high of 2021.66 and finishing a little lower at 2020.85. Tuesday gapped higher to start at the session low of 2022.71 continuing to a session high of 2050.30 and finishing near that high at 2050.03. Wednesday opened lower but reached a high of 2054.74 before reversing and falling to a low of 2036.72 and rebounding to finish at 2041.51. Thursday gapped higher to open at the session low of 2043.45 and continued to a high of 2063.55 before slipping a little to close at 2062.52. Friday opened slightly lower and moved to a high of 2072.40, before reversing and falling to a low of 2049.97 and then rebounding to finish at 2055.47.

Monday found support above likely resistance at 1980 in the lower half of the 100 L at 2000 and broke and finished slightly above the likely resistance at 2020 in the upper half of the 100 L. Tuesday left an open gap higher as it pushed to finish within the 2035 to 2055 MRL. Wednesday was turned back at the upper resistance of the 2035 to 2055 MRL, but found support at the lower resistance of this level. Thursday found resistance below the 2065 to 2070 MRL. Friday pushed a little above the upper resistance in the 2065 to 2070 MRL before slipping fairly steeply off this resistance and falling into the 2035 to 2055 MRL before rebounding to finish slightly above this resistance level.

The index gapped higher twice during the week, in Tuesday’s and Thursday’s opens, leaving both gaps unfilled. Thursday found resistance near the two previous highs as it neared the 2065 to 2070 MRL. Although Friday muscled past this resistance on good news, it failed to hold this rebound and instead fell through a lower resistance at the upper level of the 2035 to 2055 MRL before rebounding to finish slightly above the lower resistance. The fall from resistance that has turned the index lower twice already is reason enough to think it could continue lower, but many stocks also are reaching overbought levels due to run ups seen in the past week.

The index appears to have begun a third retreat from resistance found near the 2065 to 2070 MRL with these retreats being seen during the second significant pullback from likely resistance within the 100 L at 2100. Resistance below the 2065 to 2070 MRL has sent the index significantly lower in the last two rebounds into this resistance, making it seem possible this resistance had not been fully broken in the initial climb past it. Downward tension on the index appeared to increase as several constituents broke sharply lower through potential support levels during the past week. The constituent charts continue to appear to show the potential for further increases in downward tensions and it appears these downward tensions increased in the earlier retreats. It appears the index could be renewing resistance at prior resistance levels as it slips below them and this coupled with increases in downward tensions could begin to make it difficult for the index to rebound before these tensions are relieved. It continues to seem possible the fall to significant levels could continue more deeply than the previous drops. Chart formations tend to make a fall in excess of 10% seem possible within the 100 L. Past chart formations seen during large retreats on the index closely match those that are present now. It continues to seem fairly likely a significant fall could reach the lower trend or lower support line with a move lower probably staying within the 10% to 20% range. If a drop to crash potential is seen, it probably does not exceed 24% by much, but could possibly reach 35% if many of the constituents fall to lower support levels. Research suggested if a crash were to occur from within resistances in the 2000 to 2140 range, it probably finds bullish support somewhere near the two previous tops in 2000 and 2007. The index’s highest close finished slightly greater than 25% above the 2007 high.

The first significant pullback within the lower half of the resistance of the 100 L at 2100 began a little before likely resistance from 2085 to 2100. This could mean the resistance at this level is stronger than anticipated. It is also possible that this resistance level was miscalculated or that the index had not fully broken resistance from the 2065 to 2070 MRL. Although the intraday high made it above the upper level of this resistance, the index appeared to be turned back within the normal area of influence of resistance levels and near the 2065 to 2070 MRL again on Friday. It continues to seem likely the resistance within the 2065 to 2070 MRL was not fully broken in the initial rebound past it.

Average daily volume levels increased 6.62% above those in the previous week. The week’s lowest volume was seen in Thursday’s move higher and the highest volume was seen in Tuesday’s run higher. The difference in the five day volume variance decrease 15.53% below the week ago levels and finished the week at 20.77%. Volume levels were again comparable to those normally seen during bearish conditions as they had been in earlier moves higher.

Current Cautions

A new 90 E indicator will become active in 10 trading days. It seems possible this indicator could be bearish in this occurrence.

Less than a month after announcing stimulus to support the struggling economies in Europe, and without meaningful discussions with the newly elected Greek leadership, the ECB effectively threw the Greeks to the wolves. Given little other alternative, it seems possible Greek Prime Minister Alexis Tsipras could allow a default. Due to the economic ignorance of Euro Zone leadership, it seems possible this stimulus has already made matters worse than their earlier debacles did.

Safe haven assets appeared to see selloffs into the past week’s stock rally, but other factors appeared to be at play that may have aided this selloff. If this selloff were to continue, it could be bullish for stocks.

Rebounds in the past week were filled with holes, as many of the stocks that moved higher had opening gaps. Opening gaps higher were very common, more common than in any week in memory. These holes are likely to be filled in a future retreat. Overall the constituent charts appeared to show waning support in the recent rebound. Although the index price moved higher, many of the constituents stayed within overall trends lower.

Earning increases during the past year did not keep pace with stock price appreciation seen over that time in many constituents. As a result TTM P/E ratios increased. Many constituents have lowered guidance due to a variety of factors, making these higher P/E’s more of a concern. To this point, more than normal have announced plans of layoffs, although the numbers in these plans appeared to soften somewhat from earlier. Earnings reports continue to make it seem possible that a larger number of misses and a smaller beats than in recent quarters could be seen in the current quarter’s reports. Many of the stocks that are beating earnings projections are reporting earnings substantially lower than the same quarter a year ago. Lower reports are widespread, effecting earnings across nearly all sectors.

Recent rebounds from lows in many stocks could prove to be too early. Some of these stocks have since retreated, but it seems likely others could follow.

The index has entered a potentially bearish time frame. End of year rallies often begin to falter in the final days of the year or early in the following year.

The index rebounded from October lows just as a tip over pattern was completing. A tip over pattern is a collection of index and constituent charts that indicate a large drop on the index is likely. This type of pattern is evident prior to past crashes and many large downturns on the index. These patterns also often coincide closely with runs above the upper trend line on the index. Rebounds from the initial drop in tip over patterns are common. Some were quick spikes higher and others have lasted up to a few months. It seems fairly likely the index could follow this pattern and if so the fall off this rebound is generally much deeper than the initial downturn.

The index has again fallen to a significant level from the run above the upper trend line established early in the rebound off crash lows. Past breaks above the upper trend line on the S&P 500 have all produced large retreats that reach the lower trend line or lower support line at some point. It is not uncommon for the index to see one or more significant drops before seeing a retreat to one of the two trend lines. The index has entered the sixth significant retreat since initially breaking above the upper trend line on Dec 26, 2013.

If the index continues in past patterns, runs above the upper trend line have always fallen back to or below the lower trend line or lower support line within two years. The only exceptions were during trend changes, but these trend changes also occurred during a rebound from a drop to one of these two lines. The index has returned to prior trend from the last drop to one of these trend lines, so it does not appear to be in a trend change from that rebound. It therefore seems likely a break to the lower trend line or lower support line could happen within the next 11 months. Chart formations make it seem fairly likely it could occur sooner rather than later.

Approximate levels of the lower trend line for the upcoming three months are as follows: On Feb 2 it will be at about 1777. On March 2 it will be at about 1789. On April 6 it will at about 1805.

Approximate levels of the lower support line for the upcoming three months are as follows: On Feb 2 it will be at about 1630. On March 2 it will be at about 1643. On April 6 it will be at about 1659.

It seems likely the breaks lower seen in commodity prices could continue for some time to come. Crude prices continued to rebound during the week and although it could be a boon for oil stocks, it could be a break from the normal cycle needed to provide future earnings growth in the majority of stocks. Although the stock market currently perceives it as such, a continued rebound in crude prices is not a bullish indication.

Ultimately the direction that the stock market takes from here could be influenced by news events. It seems possible some of these news events could involve normal market conditions due to the time of year. It also seems possible current conditions could cause past problems to resurface. Recent ECB actions may have dumped the kettle into the fire.

When the S&P 500 broke above 2000 it entered a level research suggests could contain a large pullback. Data evaluations make it appear resistances met between 2000 and about 2140 could have the potential to cause a large drop, possibly reaching crash proportions.

Although research suggested that resistance within the 100 L at 2000 was probably the least likely area this downturn could be seen at and resistance at 2040 the most likely, the index saw the largest downturn in three years at the 100 L and passed the 2040 resistance without incidence of a significant pullback, although it spent a week at this resistance in a flatness that only two other five day periods on the S&P 500 come close to. Although both of these projections turned out to be incorrect, both of these resistance levels appeared to react to seasonal influences that may have changed the expected outcomes at these levels.

The downturn at the 100 L at 2000 did not reach the levels that could have relieved the index of a possible deeper drop. It instead completed a tip over pattern that makes a deeper drop seem very likely.

The index appears to have begun a third retreat from resistance found near the 2065 to 2070 MRL with these retreats being seen during the second significant pullback from likely resistance within the 100 L at 2100. Resistance below the 2065 to 2070 MRL has sent the index significantly lower in the last two rebounds into this resistance, making it seem possible this resistance had not been fully broken in the initial climb past it. Downward tension on the index appeared to increase as several constituents broke sharply lower through potential support levels during the past week. The constituent charts continue to appear to show the potential for further increases in downward tensions and it appears these downward tensions increased in the earlier retreats. It appears the index could be renewing resistance at prior resistance levels as it slips below them and this coupled with increases in downward tensions could begin to make it difficult for the index to rebound before these tensions are relieved. It continues to seem possible the fall to significant levels could continue more deeply than the previous drops. Chart formations tend to make a fall in excess of 10% seem possible within the 100 L. Past chart formations seen during large retreats on the index closely match those that are present now. It continues to seem fairly likely a significant fall could reach the lower trend or lower support line with a move lower probably staying within the 10% to 20% range. If a drop to crash potential is seen, it probably does not exceed 24% by much, but could possibly reach 35% if many of the constituents fall to lower support levels. Research suggested if a crash were to occur from within resistances in the 2000 to 2140 range, it probably finds bullish support somewhere near the two previous tops in 2000 and 2007. The index’s highest close finished slightly greater than 25% above the 2007 high.

The next likely resistance level above the 100 L at 2100 could be seen at the 2140 to 2160 MRL. This resistance has the potential to cause a significant pullback. The potential for these drops could change drastically depending upon the outcome at the lower resistance and being so no drop projections have been made for this resistance at this time.

There continues to be reasons to be bullish at the current time; however there might also be reason to watch more closely as some wording in reports gives reason to be somewhat more cautious. The index also continues to show patterns that are common prior to large retreats. If a large pullback is seen on the index, it could be prudent to increase stock holdings into this drop.

If gold should rebound into a large sell off in stocks, it could provide the best remaining opportunity to take profits in gold holdings. If stocks rebound strongly from this downturn as it seems fairly likely they could, it seems possible gold could shatter support at about 1190 in this retreat and might not find solid support again until near 700. A drop directly to this level seems unlikely and gold probably finds temporary support in the 900 to 1000 range before slipping lower. Ultimately, even the support at 700 is likely to fail with gold probably returning to the 200 to 300 level at some point in the future.

These data evaluations do not mean a crash is certain within the 2000 to 2140 range. The data evaluations only identified this level as one with a high potential to cause a large drop, possible reaching the 25% to 35% range; although a fall seen low in this range might not reach these levels. This range also holds most of the specifications identified in the first crashes of a market entering into a secular bull. Many chart formations that occur near large pullbacks became apparent as the index neared this resistance.

Please note there is no established resistance in the MRL levels before the index has reached these levels. Several instances have proven to hold resistance once reached; however MRL levels that the index has not yet reached are only the most likely levels that resistance will be seen based on research. Back tests of the data used to project these resistance levels work well, but they are not always exact, and these resistances could react sooner or later than expected, it is also possible the resistance will not be seen at all.

Data provided for the S&P 500 was derived from the historical daily data tables, similar data can be found at AOL Finance. Stock and Treasury charts used for analysis and commentary were provided by StockCharts.com or from those that Ron created from his data. Gold charts used for analysis and commentary were provided by Kitco .

Have a great day trading.

Disclosure: Ron has no investments in BHI. Ron is currently about 58% invested long in stocks in his trading accounts reflecting no change in his rounded investment level over the past week. Although the rounded investment level remained unchanged his cash balance increased due to the sale of one issue and dividend payments. Ron feels he is somewhat oversold and plans to eventually increase stock holdings. However; he plans to continue to sell stocks that reach long or short term targets. He plans to try to offset some of these sales with purchases that could provide short term trading opportunities while waiting until fewer indications that stocks could be heading for a large downfall are present and reinvesting into this downfall if it should occur. Absent this downturn and a break from formations that that lead him to believe this downfall could occur, he plans to wait until he finds investments at better valuations than he feels they are now. Ron will receive dividend payments from five issues in the coming week and seven in the following week. If no further investment changes are made during this timeframe, these dividend payments would not change his rounded investment level.

Ron sold a large portion of the shares he had purchased in company stock in his 401K during the past week when it neared a sell order he had entered shortly after the purchase that was adjusted slightly lower on the day of sale. Ron is currently about 25% long in stock based assets in this account.

Disclaimer: The information provided in the Stock Market Preview is Ron’s perception of the current conditions and what he thinks is the most probable outcome based on the current conditions, the data collected and extensive research he has done into this data along with other variables. It is intended to provoke thought of the possible market direction in his readers, not foretell the future. Ron does not claim to know what the stock market will do. If the stock market performs as expected, it only means he is applying the stock market history to the current conditions correctly. His perception of the data is not always correct.

This article is intended to provoke thought about investment possibilities. Acting on the information provided is at your own risk. You are urged to do your own research, and where appropriate, seek professional investment advice before acting on any information contained in these articles.