Decline In Progress
Carl Swenlin
January 23, 2009
Since the price top earlier this month the S&P 500 Index has declined about 13%. This has generated a PMO sell signal (PMO crossing down through its 10-EMA), and caused the 20-EMA to turn back down decisively before it was able to cross up through the 50-EMA. The PMO was overbought, so the crossover indicates that there is probably more downside ahead of us.

It appears that a short-term bottom is currently forming from which a short reaction rally could launch. This is a common result of PMO crossovers, and the rally normally pulls the PMO back up toward its 10-EMA. On the chart you can see a similar occurrence in September. After these brief bounces, the price decline usually continues.

The next chart shows how our medium-term price, breadth, and volume indicators have made overbought tops, and are now headed toward the oversold side of the range. The definite impression that I get is that there is a lot more price decline ahead of us.

Bottom Line: While the bulls currently appear to be putting up a pretty good fight against a further price decline, and may even be able to spark a rally, decisive tops have been established, both in price and internals. A brief rally is possible, but following that, I expect that the November lows will be challenged. * * * * * * * * * * * * * * * * * * * * *

FINAL 2008 TIMER DIGEST RANKINGS FOR DECISION POINT

#4 Bond Timer (*TD Index: 112.32)

#5 Gold Timer (TD Index: 126.33)

#9 Long-Term Timer Stocks (TD Index: 132.35)

*All timers are assigned an Index of 100 at the beginning of the year. The amount above or below the starting index indicates the percentage gain or loss for the year.


Technical analysis is a windsock, not a crystal ball. Be prepared to adjust your tactics and strategy if conditions change.

BIO: Carl Swenlin is a self-taught technical analyst, who has been involved in market analysis since 1981. A pioneer in the creation of online technical resources, he is president and founder of DecisionPoint.com, a premier technical analysis website specializing in stock market indicators, charting, and focused research reports. Mr. Swenlin is a Member of the Market Technicians Association.