Things Might Not Be Working Out for the Bears
Market sentiment remains historically bearish, with many strategists expecting new lows in the New Year. But recent price action might not be working in their favor.
The main feature on today’s chart is the falling trendline along the highs of January, March and August. SPX tried and failed to break that resistance two weeks ago. Yesterday it was right back at the line, which may suggest its relevance is fading.
The same can be said of the 200-day simple moving average (SMA). In August, prices knifed lower after failing near the 200-day SMA. But this month, they’ve returned quickly for a second visit.
Next, the most recent bounce seemed to confirm the importance of support around 3910 and the 100-day SMA. (See our November 18 idea for more on those.)
Third, the 8-day exponential moving average (EMA) has remained above the 21-day EMA since October 25. That suggests the bears have been unable to take control. (The chart above illustrates with our 2 MA Ratio custom script.)
Finally, let’s consider some history on the second chart. The current bear market is the deepest and longest-lasting pullback since 2007-2008. (We’ve gone 238 days without hitting a new 52-week high.) At this point in 2008, it would have been late September. SPX had failed to hold its 100-day SMA and was making lower highs along the 50-day SMA. The 8-day EMA / 21-day EMA ratio barely turned positive.
As we know, another 40 percent collapse followed that moment 14 years ago. But this time around, things may be playing out differently.
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. You Can Trade, Inc. is also a wholly owned subsidiary of TradeStation Group, Inc., operating under its own brand and trademarks. 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.
The main feature on today’s chart is the falling trendline along the highs of January, March and August. SPX tried and failed to break that resistance two weeks ago. Yesterday it was right back at the line, which may suggest its relevance is fading.
The same can be said of the 200-day simple moving average (SMA). In August, prices knifed lower after failing near the 200-day SMA. But this month, they’ve returned quickly for a second visit.
Next, the most recent bounce seemed to confirm the importance of support around 3910 and the 100-day SMA. (See our November 18 idea for more on those.)
Third, the 8-day exponential moving average (EMA) has remained above the 21-day EMA since October 25. That suggests the bears have been unable to take control. (The chart above illustrates with our 2 MA Ratio custom script.)
Finally, let’s consider some history on the second chart. The current bear market is the deepest and longest-lasting pullback since 2007-2008. (We’ve gone 238 days without hitting a new 52-week high.) At this point in 2008, it would have been late September. SPX had failed to hold its 100-day SMA and was making lower highs along the 50-day SMA. The 8-day EMA / 21-day EMA ratio barely turned positive.
As we know, another 40 percent collapse followed that moment 14 years ago. But this time around, things may be playing out differently.
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. You Can Trade, Inc. is also a wholly owned subsidiary of TradeStation Group, Inc., operating under its own brand and trademarks. 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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