On Monday MACD triggered a sell signal for the S&P 500. There are a number of reasons why this sell signal should be watched very carefully:
1) It occurred after the S&P 500 (SPY) pushed into triple resistance.
View enlarged S&P 500 MACD chart here
The April 2 Profit Radar Report highlighted this resistance cluster as follows:
“Trend line resistance going back to October 2011 is at 1,900. Minor trend line resistance is at 1,898. The centerline of a short-term trend channel is at 1,898."
2) The S&P 500 reversed at 1,897.28 and painted a bearish red reversal bar.
3) The S&P 500 found support at the 50-day SMA and a trend channel going all the way back to the 2009 bear market low.
4) Perhaps most importantly, seasonality is turning quite bearish in April.
A bounce is likely since the S&P 500 (IVV) found support exactly where it should have. However, when this bounce is finished (target levels for this bounce are available via the Profit Radar Report), seasonality and the MACD sell signal may take over and push stocks lower.
Why is seasonality such a big deal?
A chart says more than a thousand words, and this chart shows that (based on history) investors do not want to own stocks after April in a midterm election year.
The chart and further explanation is available here:
Simon Maierhofer is the publisher of the Profit Radar Report. The Profit Radar Report presents complex market analysis (S&P 500, Dow Jones, gold, silver, euro and bonds) in an easy format. Technical analysis, sentiment indicators, seasonal patterns and common sense are all wrapped up into two or more easy-to-read weekly updates. All Profit Radar Report recommendations resulted in a 59.51% net gain in 2013.
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