A Quick $SPX Analysis

The S&P 500 is trending up since bottoming on October 13, 2022. It has cleared a few critical resistance levels and broken above bullish chart patterns since then. The probability is high that the upswing will go on for some time.

Monthly Timeframe

Fig 1: S&P 500 – Monthly

Fig 1. tells a good story of the S&P 500. The logarithmic scaled chart shows that despite major swings over the long term, the index has been trending higher. There have been some sideways moves lasting many years and some down moves lasting for several months, but sooner or later, the upswing resumes.

The decade of the ’70s saw a years-long sideways move, which contained one extended down-moveĀ  – From January 1972 to September 1973. It contained up-moves – from May 1970 to December 1972, from October 1974 to December 1976, and from March 1978 to November 1980. It also had a sideways move overlapping up-moves – from December 1975 to May 1980.

Another significant horizontal range was in the first decade of the 21st century, which included a couple of market crises and crashes. Between 2014 and 2016, the index underwent another horizontal move, albeit in a smaller range.

Analyzing the price with a 9-month RSI gives us more insights. Invariably, the major declines or bear markets have coincided with Bearish Divergences – the declines of 1987, 2000, 2007, 2020, and 2022. Similarly, the upswings have coincided with either a Double Bottom or a break of a downtrend line on the RSI – the moves of 1974, 1982, 1990, 2003, 2009, 2016, and 2020. In 2019, the downtrend line of RSI from its 2018 high was broken (not drawn on the chart). This was due to the once-in-a-lifetime pandemic.

In September 2022, the 9-month RSI tested the lows of March 2020 and then bounced up. In May-June 2023, theĀ  RSI downtrend line from its August 2021 high is broken. Historically, this has signaled the resumption of an uptrend.

Weekly Timeframe

Fig. 2: S&P 500 – Weekly

The weekly chart of the S&P 500 (Fig. 2) supports the argument that the S&P 500 is resuming the uptrend. From late April to late May 2023, the index was trying to break above a symmetrical triangle and decisively broke above the pattern during the week of May 15.

Since the break, the index has moved above the high of the pattern. The 61.8% extension target is near 4625.00 and the 100% extension target is near 4950.00, which is above the current all-time high.

Daily Timeframe

Fig 1: S&P 500 – Daily

On the daily chart, the S&P 500 has broken above a resistance level created by the August 16, 2022, high (Fig. 3).

After making the all-time high of 4818.62 on January 4, 2022, the index started a downtrend and declined more than -27.5% to 3491.58 by October 13, 2022. Since then, the index has made a series of bullish moves that culminated in it breaking above the 52-week high in mid-June 2023. The next meaningful resistance zone, which bounded between 4495.12, the low reached on December 3, 2021, and 4512.94, the high reached on April 21, 2022.

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