Weekly Analysis: Oct 26th - Oct 30th.

Lets take a look at what transpired last week in the markets:
The S&P 500 Spyder (SPY) declined 4.2% over the past week, with only one positive day coming on Thursday. (See Figure 1. below).

Figure 1. The S&P 500 Spyder (SPY) 15 minute Chart for the week of 10/26/09 – 10/30/09


The overall outlook for the market took a turn for the worse as SPY crossed below a key support level at $107.15. Even more significant was when SPY penetrated the bottom of  two key up-trend channels dating back to to the beginning of the current rally (in March).  (See figure 2. below).

Figure 2. The S&P 500 Spyder (SPY) daily chart dating back to march. 

SOME INTERESTING NUMBERS regarding the current bull market rally that began back on March 9th:

The current bullish trend has lasted 34 weeks including last week. Of those weeks, 12 have been down weeks. Interestingly though, half of those declining weeks came in the last 10 weeks, meaning 60% of the past 10 weeks have been losers. During the first 24 weeks of the rally, only 25% were losers. This indicates the rally is either slowing or reversing. What makes it different from previous corrections, is that both uptrend channels were broken to the downside.

The 4.2% decline represents the largest weekly decline since this bull rally began the week of 3/9/09. The last decline of at least that size (a decline of 5%), was the week before, 3/2/09 (See figure 3.).

The all-time market high for SPY was $157.52 on October 11th, 2007. The days following can be considered the start of a bear market that is still in effect today. If we look at the week starting after this all-time high, we can see that it was the only week in the history of SPY (other than last week), that had a decline of 4.2%.  (See figure 3.).

Figure 3. The S&P 500 Spyder (SPY) weekly chart dating back to market highs in October 2007.


The similarities in the percent declines from this past week (which comes at a potential top of a bull rally) and the week that followed the last "top" of a significant bull rally, are intriguing. They may not confirm that the weeks ahead will repeat the same behavior as the downtrend that started back in Oct 2007, however, it is an interesting coincidence well worth being aware of.

The outlook for the coming week is definitely bearish, but I will go into this in more detail and provide some scenarios to look for in my next post.