SPX should have every chartist out there conflicted...

アップデート済

The SPX consolidation around the orange downtrend line is confusing every chartist out there for good reason. Why-because it is giving off conflicting signals and history really isn't much of a guide.

Typically when you draw a monthly downtrend line using 3-6 months of a trend line and then you have an monthly open or close ABOVE the downtrend line (orange line on my chart) you see continued follow thru. However Nov 2022 closed above the orange line but then December bearishly closed below it (no follow thru). Jan then closed bullishly above it and now Feb looks to be closing above it but have see-sawed around that downtrend line with rather large open/close monthly ranges. This tells me, at this point, neither the bulls nor the bears can claim victory.

The bulls see a "inverse H&S" on the monthly line chart however there's no break of the neckline thus far and therefore it's just a "what if" at this point.

The bears see one big bear flag on the monthly but again that too is just a "what if" at this point.

Here are past SPX charts using the same downtrend line analysis:

For me, I'm staying patient & neutral with most of my trading cash sitting in my IBKR account earning decent interest income until I can see a clear winner.

After studying the above you can see that "bull" breaks of the orange line typically last many months to many years BUT the bulls IMO have not proven themselves at this point so for me it's better to stay in cash; earning a decent risk free yield. It's worth noting-there are so many examples of bull breaks of the downtrend line with follow thru but only two examples (1975 & 2002) of breaks in the downtrend line WITHOUT immediate follow thru so you have to respect that we are in a conflicted market.

What I am watching:
VIX (my read of this chart is saying a spike above 30 is not in the cards for a bit-you can read my recent VIX posts as to why)
DXY (The ROC in how this thrusted downwards is telling me, in the very short term, the chart is rather weak and we are currently experiencing a countertrend to the downward trend than begun in Oct 2022)
2YR/10YR yields: The thrust from the breakouts of the downtrend & horizontal lines are not the same type of thrusts we saw previously so IMO slowing yield thrusts are telling me the bond market seems to think yields might be starting to "level out" before they possibly reverse course (to the downside) but only if we actually experience a recession.

I do believe that yields topping & coming down is actually bearish for the market near term so I am watching them very closely for a reversal sign to the downside. Why-because that means the economy, on it's own merit, is actually not too strong without stimulus, QE & ZIRP. I also think the topping process of yields will play out over weeks/months...it's not going to be a sharp pivot and this topping process could cause markets to chop for weeks/months...

ノート

I wanted to isolate the other two times that SPX closed above the orange downtrend line only to then close BELOW it afterwards. From a birds eye view I don't see a similarity when comparing the 1975 chart...do you? The only similarity I see to the 2000-2002 downtrend is the relationship of price to the orange line...meaning price stays relatively close to that line. However the point in which price breaks above and then below the line isn't similar in either case...

ノート

For 3 months now we have closed above the green trend line showing the bulls are in control. The risk to the bulls is a re-test of the monthly Tenkan Sen which is at 3875.67; near or around this area will be bought up IMO. I am not of the opinion that a "new" bull market has begun but rather the bull market that started in March 2009 is still very much in tact. Nothing about the pull back in 2022 invalidated the 2009 bull trend therefore it continues. If you are uber bullish do be mindful of weakness to possibly show it's hand in the near term (6-12 months) as the breakout from the non-horizontal trend line (orange line) was atypical from past breakout's. In addition, the break out from the green trend line occurred below an ATH and was not forceful showing a lack of powerful conviction...i.e. there was no "thrust" on the break out.

ノート

If you follow Ichimoku, today marks the day traders should exit bearish trades as the stop has been hit! Typically we see an exhaustive capitulation move and then a reversal after stops hit. Maybe next week? Should July produce another bullish monthly closing then the monthly Tenkan Sen & Kijun lines will cross producing even more bullish sentiment...all depends on how traders view the massive amount of earnings next week.

ノート

As stated in my June 2nd update, the risk to bulls was a re-test of the monthly Tenkan Sen. As you can see in the blue circle above there was a re-test and bounce off it. I still maintain a perplexed bullish view of SPX...from the Oct 2022 bottom to today it has been an "a typical" type of bottom IF that really was "the bottom". The way the bottom formed on a daily basis was not typical (see previous post "Bear market bottoms examined), the retracements after the bottom below the 50% is not typical, the non-horizontal break out shown at the start of this post is not typical, annd now a re-testing of the Tenkan Sen PRIOR to making a new all time high is not typical. Still on high alert for a reversal signal but again the bulls are still in control.

ノート

DENIED...The bulls not only could not close 2023 above 4800; it did not even reach 4800 this year. Below is the yearly chart for SPX from inception in 1957...the last 3 yearly candle closings (2021, 2022 & 2023) look nothing like its past history. The red dotted lines are closing HIGHS followed by weakness years. Typically year 3 after weakness either breaks out or we are still in bear mode. IMO getting to 5,000 is becoming a HUGE task.