Diagnosing the S&P 500
The S&P 500 has been under pressure since the summer. Today we’ll consider some patterns that may give clues about the big index.
First is the price gap from September 21, one day after the Federal Reserve gave a “higher for longer” message. SPX flirted with that price zone for six sessions without breaking through it. Has new resistance emerged?
Interestingly, two bearish outside days occurred (marked with small arrows) during this time. That may confirm sellers have taken control.
Next, this month’s peak represents another lower high on the weekly timeframe.
Then compare the trendline along the highs of July and September with the trendline along the peaks of September and October. Notice how the decline has steepened.
Fourth is the relationship between the 20-, 30- and 50-day simple moving average (SMAs). The 20-day SMA is below the 30-day SMA and the 30-day SMA is below the 50-day SMA. That may indicate a bearish intermediate-term trend.
The short-term trend could also be getting bearish after an attempted bounce early in the quarter. The lower study includes our 2 MA Ratio custom script with the 8-day exponential moving average (EMA) and 21-day EMA. It didn’t manage to turn positive in the latest bounce. (The fast EMA never crossed above the 21-day EMA.)
Next you have the August 2022 high around 4235. SPX bounced at this level in late June and mid-August. Prices have spent the last month dancing on either side of it before closing back under it the last two sessions. Has that support finally given way?
We end with the long-term monthly chart of the bull market since it began early last decade. It’s had a relatively clear channel, with deviations only occurring at extreme moments like March 2020 and late 2021. Earlier this year, the index rallied from the bottom of the channel. But now it’s stalling at the mid-point (failing to reach the top of the channel). That could also be a negative sign.
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TradeStation Securities, Inc., TradeStation Crypto, Inc., and TradeStation Technologies, Inc. are each wholly owned subsidiaries of TradeStation Group, Inc., all operating, and providing products and services, under the TradeStation brand and trademark. TradeStation Crypto, Inc. offers to self-directed investors and traders cryptocurrency brokerage services. It is neither licensed with the SEC or the CFTC nor is it a Member of NFA. When applying for, or purchasing, accounts, subscriptions, products, and services, it is important that you know which company you will be dealing with. Please click here for further important information explaining what this means.
This content is for informational and educational purposes only. This is not a recommendation regarding any investment or investment strategy. Any opinions expressed herein are those of the author and do not represent the views or opinions of TradeStation or any of its affiliates.
Investing involves risks. Past performance, whether actual or indicated by historical tests of strategies, is no guarantee of future performance or success. There is a possibility that you may sustain a loss equal to or greater than your entire investment regardless of which asset class you trade (equities, options, futures, or digital assets); therefore, you should not invest or risk money that you cannot afford to lose. Before trading any asset class, first read the relevant risk disclosure statements on the Important Documents page, found here: https://www.tradestation.com/important-information.
First is the price gap from September 21, one day after the Federal Reserve gave a “higher for longer” message. SPX flirted with that price zone for six sessions without breaking through it. Has new resistance emerged?
Interestingly, two bearish outside days occurred (marked with small arrows) during this time. That may confirm sellers have taken control.
Next, this month’s peak represents another lower high on the weekly timeframe.
Then compare the trendline along the highs of July and September with the trendline along the peaks of September and October. Notice how the decline has steepened.
Fourth is the relationship between the 20-, 30- and 50-day simple moving average (SMAs). The 20-day SMA is below the 30-day SMA and the 30-day SMA is below the 50-day SMA. That may indicate a bearish intermediate-term trend.
The short-term trend could also be getting bearish after an attempted bounce early in the quarter. The lower study includes our 2 MA Ratio custom script with the 8-day exponential moving average (EMA) and 21-day EMA. It didn’t manage to turn positive in the latest bounce. (The fast EMA never crossed above the 21-day EMA.)
Next you have the August 2022 high around 4235. SPX bounced at this level in late June and mid-August. Prices have spent the last month dancing on either side of it before closing back under it the last two sessions. Has that support finally given way?
We end with the long-term monthly chart of the bull market since it began early last decade. It’s had a relatively clear channel, with deviations only occurring at extreme moments like March 2020 and late 2021. Earlier this year, the index rallied from the bottom of the channel. But now it’s stalling at the mid-point (failing to reach the top of the channel). That could also be a negative sign.
TradeStation has, for decades, advanced the trading industry, providing access to stocks, options, futures and cryptocurrencies. See our Overview for more.
Important Information
TradeStation Securities, Inc., TradeStation Crypto, Inc., and TradeStation Technologies, Inc. are each wholly owned subsidiaries of TradeStation Group, Inc., all operating, and providing products and services, under the TradeStation brand and trademark. TradeStation Crypto, Inc. offers to self-directed investors and traders cryptocurrency brokerage services. It is neither licensed with the SEC or the CFTC nor is it a Member of NFA. When applying for, or purchasing, accounts, subscriptions, products, and services, it is important that you know which company you will be dealing with. Please click here for further important information explaining what this means.
This content is for informational and educational purposes only. This is not a recommendation regarding any investment or investment strategy. Any opinions expressed herein are those of the author and do not represent the views or opinions of TradeStation or any of its affiliates.
Investing involves risks. Past performance, whether actual or indicated by historical tests of strategies, is no guarantee of future performance or success. There is a possibility that you may sustain a loss equal to or greater than your entire investment regardless of which asset class you trade (equities, options, futures, or digital assets); therefore, you should not invest or risk money that you cannot afford to lose. Before trading any asset class, first read the relevant risk disclosure statements on the Important Documents page, found here: https://www.tradestation.com/important-information.
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