How To Use the Technical Analyst Section of the RightLine Report

Note: If you’re new to technical analysis we suggest that you read Stock Charts And Trends before starting this tutorial. Once you’re comfortable with the simple concepts of Support & Resistance, Moving Averages and Trend, you can return to this page and start the tutorial.

Where Is The Market Headed?

You’ll find the Technical Analyst section in each issue of The RightLine Report. Although we don’t attempt to “forecast” Bull or Bear markets in the typical sense, we do use technical analysis to anticipate probable market reversals and trend continuations in the short to mid term.

The Technical Analyst section primarily focuses on the the Standard & Poor’s 500 Index, or S&P 500, which is considered to be the most important of the major indices. Also referred to as the “SPX,” it offers the best at-a-glance overview of the broader market’s performance.

Why is the S&P 500 Market Index Important?

The S&P 500 Index is a market-capitalization-weighted index of the 500 largest publicly traded companies in the USA. The S&P is a float-weighted index. This means that company market capitalizations are adjusted by the number of shares available for public trading.

The index is widely regarded as the best gauge of large-cap US stocks. As a result, there are many funds designed to track the performance of the S&P 500.

Like the ocean tide, when the S&P 500 reverses direction, individual stocks will usually follow along in the same general price direction.

Obviously it can be very helpful to know the levels where the market is likely to reverse. For example when a major index approaches a known level of support or resistance, it is wise to wait for the index to reach that level before entering or exiting a stock position.

The reaction of a major index to a support or resistance level often reveals whether the market will continue to follow the current trend, or will reverse into a new trend in the opposite direction.

In the Tuesday and Thursday issues of the RightLine Report you’ll find a daily chart of the S&P 500. Beneath the chart is a list of trend indicators and useful “guideposts” for the top three major US indexes. Let’s take a closer look at what these are all about.

The S&P 500 Daily Chart

The daily chart is crisscrossed with the same key moving averages that we follow on specific stocks presented in the RightLine Report: the 13, 22 and 50 day Exponential Moving Averages, plus the 100 and 200 day Simple Moving Averages. These are closely watched by market observers, with the 50 and 200-DMAs tending to carry more significance. All five of these Moving Averages frequently act as support or resistance.

Beneath the SPX chart is a summary of what the chart is telling us, plus a number of other important support and resistance levels as well:

S&P 500 - 1140.45 March 9, 2010

52-Week High: 1150.23
52-Week Low: 676.53
Daily Trend: UP
Weekly trend: UP
Daily Exponential Moving Averages:
13 EMA: 1119.36
22 EMA: 1112.47
50 EMA: 1106.25
Daily Simple Moving Averages
100 SMA: 1101.15
200 SMA: 1041.14
Weekly Pivot Levels
Resistance 3: 1195.85
Resistance 2: 1161.83
Resistance 1: 1150.26
Pivot: 1127.81
Support 1: 1116.24
Support 2: 1093.79
Support 3: 1059.77

Here is a brief explanation of each item on the list:

1) The first row in this section shows which index the data is for, the most recent closing price, and the date.

S&P 500 - 1140.45 March 9, 2010

2) The next two items are the 52-Week High and 52-Week Low. They are powerful Support and Resistance levels, so you can expect a significant market reaction anytime a major index comes in contact with either one of them.

52-Week High: 1150.23
52-Week Low: 676.53

3) Here you find the key moving averages – the 13, 22, 50, 100 and 200 Daily Moving Averages. All key moving averages that are ABOVE the current price level are considered Resistance Levels, while all the key moving averages BELOW the current price level are considered Support Levels.

Daily Exponential Moving Averages:
13 EMA: 1119.36
22 EMA: 1112.47
50 EMA: 1106.25
Daily Simple Moving Averages
100 SMA: 1101.15
200 SMA: 1041.14

4) Next are the Daily Chart Trend and the longer-term Weekly Trend. As you might guess, UP indicates a Bullish upward trend is currently underway, and DOWN indicates that Bears are in the driver’s seat. SIDEWAYS is a sign that the market is moving in a directionless fashion. NOTE: Breakouts from sideways patterns often lead to large price swings.

Daily Trend: UP
Weekly trend: UP

5) In this section are the Weekly Pivot Levels. For many years, floor traders at the US stock exchanges and market makers for all securities have used pivot points to determine critical support and/or resistance levels.

Weekly Pivot Levels
Resistance 3: 1195.85
Resistance 2: 1161.83
Resistance 1: 1150.26
Pivot: 1127.81
Support 1: 1116.24
Support 2: 1093.79
Support 3: 1059.77

The Bigger Picture

In the weekend issue of the RightLine Report we include the usual guideposts, but also pull back to see what the “big picture” is saying. Instead of a daily chart, a weekly chart of the S&P 500 shows you how the latest price action has impacted the longer-term view.

The same moving averages (13, 22, 50 and 200) are used in this weekly timeframe. While the daily chart is helpful for fine-tuning trade set-ups, the weekly perspective gives some insight into the overall health and direction of the market.


As the saying goes, a picture is worth a thousand words. The S&P 500 daily chart helps you see, at a glance, where the likely support/resistance levels are. Since the market collectively pays a lot of attention to these levels, the Technical Analyst section of the RightLine Report gives you a considerable trading advantage.

We place the most focus on the S&P 500 because it provides the best view of the broader market’s performance. But by keeping tabs on all three major indices, you’ll have a good all-encompassing view of where the market’s headed next. And that, in turn, can make a huge difference when it comes to fine-tuning your strategy and deciding which trade set-ups to enter.