This Day On The Street
Continue to site
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

S&P 500 May Be Above 2000 but There's Still Downside Risk

NEW YORK (TheStreet) -- Whenever a major equity average reaches a major milestone, investors should look at the charts to evaluate the risk/reward of that index. The S&P 500 closed above 2000 for the first time on Tuesday so its time to evaluate its daily, weekly and monthly charts.

Courtesy of MetaStock Xenith

The daily chart for the S&P 500 shows its price pattern since trading as low as 1343.35 on Nov. 16, 2012. The key for the uptrend was the close on Nov. 21, 2012, above its 200-day simple moving average (green line) at 1382.93. This moving average has not been tested since than and it's at 1876.2 Wednesday morning. The study in red at the bottom of the graph is the 12x3x3 daily slow stochastic at 92.97. This is extremely overbought as this reading is well above the overbought threshold of 80.00.

Read More: 7 Stocks Warren Buffett Is Selling in 2014

Going back 20 years the S&P 500 has tested its 200-day simple moving average in every year except 2013 and 2014 year to date. Investors should consider booking profits on a high probability that the 200-day SMA will be tested before the year ends. Keep in mind that the 200-day SMA is considered a short-term "reversion to the mean."

Courtesy of MetaStock Xenith

The weekly chart of the S&P 500 is positive with its five-week modified moving average at 1965.74. The green line on this graph is the 200-week simple moving average, which was last tested at 1142.81 in October 2011. Today this average is at 1502.84. This moving average is considered a long-term "reversion to the mean."

1 of 2

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
Submit an article to us!
SPY $208.90 0.00%
AAPL $125.80 0.00%
FB $77.56 0.00%
GOOG $530.80 0.00%
TSLA $232.95 0.00%


DOW 17,928.20 -142.20 -0.79%
S&P 500 2,089.46 -25.03 -1.18%
NASDAQ 4,939.3270 -77.6020 -1.55%

Partners Compare Online Brokers

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs