A technical look at the S&P 500

Posted: Sep 26, 2014 10:00:46 AM

Over the last week the stock market has gone down roughly 2.7%. Was it the start of US bombings in Syria and Iraq? The poor economic performance of Europe and China? Was it home sales? Durable goods orders?   Fed Fisher’s comments?  It was all of the above, plus poor technical indications.

We have consistently mentioned that markets were fully valued in the short term when trading at 17 times 2014 and 16 times 2015 earnings. The risk/reward for new money was too high to enter the markets. It was simply the low growth, wages and the expectation of higher interest rates at this valuation that has made Granite Group  concerned.

There are some indicators that are not fundamental in basis but are more technical.  Technical data shows points where markets are over-bought and over-sold.  On Tuesday of this week, the S&P 500 hit a technical violation break at 1985.00. Going forward, the next technical support levels look to be approximately 1940-1950, then 1925  and then finally the August 7 low of 1904.  This does not mean that we will hit or go through these supports. They are signals to see if more downside is to come.  This is mostly short term information for entry points on pullbacks, as we do expect the S&P to rise slightly in the 4th quarter.

Please feel free to call us directly at 203-210-7814 with any questions or concerns.  You can also follow Granite Group Advisors on LinkedIn and learn more about our Corporate Retirement Services and Wealth Management on our  Website.

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