S&P 500 October looks alot like April

Daily Chart:

Let start with the fundamentals.

1) Jobs report on Friday October 8th - From Bloomberg
Released on 10/8/2010 8:30:00 AM For Sep, 2010

	Consensus	Consensus Range	Actual
Nonfarm Payrolls - M/M change	-8,000	-75,000  to 25,000	-95,000
Private Payrolls - M/M change	85,000	0  to 100,000	64,000
Unemployment Rate - Level	9.7 %	9.6 % to 9.8 %	9.6 %
Average Hourly Earnings - M/M change	0.1 %	0.0 % to 0.2 %	0.0 %
Av Workweek - All Employees	34.2 hrs	34.2 hrs to 34.3 hrs	34.2 hrs

2) Currency War
See a previous post on recent  Japanese intervention 
But in addition to this look at today's major news headline on Bloomberg.
Finance Leaders Call for IMF Role in Averting Protectionist Currency War

"Global governments called on the International Monetary Fund to calm the recent outbreak of tensions over currencies, which they warned risk triggering a protectionist backlash"

Speaking of protectionism : US House passes China currency sanctions bill 

Euro zone currency : Euro zone chief says currency too strong


A possible scenario I am looking at is that the market has priced in a significant part of QE2 and that is why the S&P is still climbing.  The real question that has to be asked is..... What if they don't do QE2?  Look at the instability in the Currency market.  The US 99% of the time will do what it needs to do, however, if there is some pressure to stop debasing currencies they might not have the political will to do another QE round.  IF that is the case, what QE has been priced into the market will quickly evaporate. 

Now if QE does happen then we will could still see a slow crawl up however, turning to some technicals it is interesting to see the similarity of technicals between April +/- a month, and October +/- a month.

ADX: The ADX line is decreasing showing a Weakening of trend.  As the Red and Green lines get closer watch for cross overs for potential turn date.

MACD: Both in April and in October the MACD histogram has had an extended period of positive ticks.  However, the MACD line is still >0 which is still bullish.  Watch for strengthening red bars on the histogram for a potential momentum shift.

Slow Stoch: Bearish Divergence in both cases as indicated by the line. The rally continued for about 20-30 days after divergence until the breakdown occurred.  It could be argued that the Slow Stoch is at or almost at its turning point.  Whipsaw in and out of the 80 zone (over bought condition) usually doesn't sustain.  It appeared from the chart when the the yellow line dips twice under the 80 line a breakdown is likely on the third drop below the 80 line.  Watch for the yellow breaking below the 80 zone for a potential momentum shift down.

Similar to the flash crash, this rally has its base build on top of a bearish divergence. This rally can still continue however, the higher it goes up the larger the potential for a strong bear move in the future.  The trigger of this could be a postponing of QE2, it is thought that November 2nd's FOMC meeting will be the timeframe QE2 is announced.  If this is the date that the market has also priced in the announcement, if it doesn't come then prepare for the market to adjust back to reality.