S&P 500 Sell Signals Indicate Limited Gains: Technical Analysis

The Standard & Poor’s 500 Index may be unable to gain further after climbing 16 percent from this year’s low, according to John Fletcher, an exchange-traded fund specialist and technical analyst at Charles Stanley in London.

A sell signal for the benchmark index for U.S. equities has been triggered after 13 days on which the gauge closed at a higher level than two days previously, Fletcher said in a phone interview today, citing indicators developed by Tom DeMark of Market Studies LLC.

“The large number of potential sell signals leaves me cold to the thought of buying at current levels,” Fletcher said. “While the daily chart is showing 13 sells, the weekly chart has also been building and with the close last week registered a sell 13 as well. The last sell 13 back in April 2010 resulted in a drop from 1,219 to 1,010.”

The S&P 500 rose 0.2 percent to 1,183.08 on Oct. 22, ending the week 0.6 percent higher. The measure has rallied 16 percent from this year’s low in July amid better-than-estimated corporate earnings and speculation that the Federal Reserve will buy bonds to stimulate the economy, a tactic known as quantitative easing.

In technical analysis, investors study charts of trading patterns to forecast changes in a currency, commodity, security or index.