David Keller, CMT on Why the S&P 500 is Headed Lower

David Keller, CMT, is the president and chief strategist of Sierra Alpha Research, a technical analysis research firm. Previously, Keller was managing director of research at Fidelity. This week, he made an appearance on Bloomberg along with host, Abigail Doolittle. He presented three charts that suggest the next move for the S&P 500 is lower.

He begins with a chart of the S&P 500 and explains:

“One of the most difficult or challenging market environments is a bear market rally”

He thinks that the 50-day moving average is (in orange) is more likely to act as resistance rather than support. In addition, he uses RSI as a gauge of momentum and explains that the entire RSI has generally shifted down suggesting that buyers are losing steam.

The next chart Keller presents is a weekly chart of the Technology sector and points out that this is one of the more “timely” sectors of the market.

He uses a 13 and 34-week moving average, to demonstrate that the Tech sector has fallen below both of these long-term moving averages, which suggests we’re in a downtrend. The index is also testing a downward sloping channel that he expects will act as resistance.

The last chart Keller shows us is a chart of Gold pictured below. He observes that unlike the S&P 500 and Tech sector, Gold is showing short term weakness within a long-term uptrend.

He uses the Ichimoku Cloud, a traditional Japanese trend indicator and explains that it’s bullish that price is above the cloud. Keller again uses RSI as a momentum gauge and thinks it would be a good buying opportunity if RSI pulled back to around 40.

These three charts that Keller presents paint a risk-off environment ahead for stocks. Keller gives viewers plenty of reasons why a cautious approach might be best for now. You can watch his entire segment on Bloomberg here.