TRADING JOHN MURPHY

[TREND1]

2/5 WEEKLY CHART ALSO IMPROVES... Chart 2 plots a weekly chart of the S&P 500 since the start of its last major upleg at the beginning of 2016. Big negative divergences on its weekly RSI and MACD lines last September warned of the market downturn that took place during the fourth quarter. There are both positives and negatives on the chart. One positive is that the 14-week RSI line (upper box) bounced off an oversold reading near 30 in late December which helped launch the current rebound (black arrow). It's now trying to climb back over its mid-50 line which would put it in positive territory. The lower box shows weekly MACD lines also turning positive for the first time since late September. The MACD lines, however, are turning up from the lowest level in more than three years, and have a long way to go to move back over their zero line. A glance back at the early 2016 bottom shows that happening during the second quarter of that year (green circle). The blue circle shows weekly moving average lines also turning positive by April of that year. Both weekly indicators have a longer distance to climb this year to turn positive. Chart 2 also shows that the SPX has a long way to climb to reach its broken trendline that defined its last three-year uptrend. It also shows, however, the prices found support at the 50% retracement level measured from its early 2016 bottom to its late 2018 peak. That's pretty normal and somewhat encouraging. The weekly bars show the late 2018 downturn being contained, but leave the question of upside potential in some doubt.