Today I was doing some technical analysis on Google. Google is at a major technical inflection point, and which ever direction traders decide to take it will have a serious impact on the stock.
Google is trading at it’s previous resistance zone set in May, 2008, at the 600 price level. From a technical stand point, Google is showing all kinds of bearish divergence, which is expected at such an important level of resistance. There has been a consistent drying up of volume as Google has rallied higher, but we’re starting to see a volume increase on down days in google. Finally, the Balance of Power indicator is showing that quiet accumulation has gone from Google, and full fledged buying frenzy has ensued.
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What’s more interesting however is the relation between Google’s price movement, and the broader markets, particularly the S&P 500.
From the highs set in late 2007, through the first part of the crash into march 2008, google was in lock step with the broader index. The subsequent bounce was also almost identical to the day. However, since then, google has lead price action in the S&P 500 by approximately 4 months.
If you look at the charts as a percentage view, and overlay them on the same chart you’ll get a good sense of what I’m talking about.
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So the question remains, is Google a leading indicator for the market? If so, then the critical 600 price inflection point should help predict movement through the key 1120 / 1080 levels on the S&P 500. Let’s hope so!
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