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Technical analysis - Are stocks finally reaching a top

SPX Tech analysis by Simon Kazinsky on 21:27 Octuber 13, 2019 EST

News outlets are playing the recession drums but, are stocks replicating this sentiment?

We are all becoming a bit anxious with the prospect of a looming economic downturn amid multiple macro indicators starting to flash red but the reality is that, broadly speaking, stocks are yet unaffected.

The chart above shows the long term performance of the Standard and Poors 500 index and it is clear that we are close to the all time highs made earlier this year. Bytheway, other indices such as the CAC, DAX, FTSE and even the IBEX haven't broken important medium/long term supports either.

I have chosen the cross of the 7 months lows moving average as a reliable indicator of weakness because it has rarely been pierced in decades but when the break is confirmed it still allowed to capture the lion's share of the decline in the previous two recessions. Furthermore, this moving average has provided support in the recent decline were a low just below 2,780 was found before bouncing back. At present it sits at 2,830 so we should sit tight and perhaps take minimum short positions if we start seeing weakness in shorter time frame charts but always keeping the position small and with stop loses not to far off.

The trend is still up even if fundamentals are deteriorating.