S&P 500: No Second Chances, Week Starting August 19th (Technical Analysis) (SP500)

Information this week was about pretty much as good as even probably the most optimistic bull may need hoped for and any remaining bearish technical indicators have been put to relaxation with the S&P500’s (SPY) transfer by means of 5390-400. There have now been 7 greater closes in a row and it seems a brand new leg of the bull market is underway.

The early resumption of the rally could also be irritating for a lot of who missed the underside. I am sadly on this camp – after calling the highest and a correction to 5265, I used to be all set to load up once more, however in fact the market did not give me a pleasant little dip to purchase. The “crash” on August fifth obtained me overly cautious and I’m now underinvested. I might like to see one other large dip, however I am additionally taking a look at alternative routes to purchase, even when the S&P500 is approaching its all-time excessive; it would not have a tendency to provide consumers a second probability.

This week’s article will determine new inflection factors. These can assist maintain you on the best aspect of the development and can be utilized to enter trades with minimal danger, even when the market has moved a good distance. Varied methods can be utilized to a number of timeframes in a top-down course of which additionally considers the most important market drivers. The goal is to offer an actionable information with directional bias, necessary ranges, and expectations for future worth motion.

S&P 500 Month-to-month

The August bar has not solely traded again into the July vary above 5390, however is now again in constructive territory. There are nonetheless 2 full weeks to go till the month-to-month shut, however at this juncture, a bullish bar has shaped and solely an in depth under 5390 will shift it impartial/bearish.

I am barely shocked on the brevity of the correction in August. The month-to-month exhaustion took 8-9 months to arrange, and got here in confluence with a weekly sign and the most important Fib extension at 5638. It was a full home of bearish indicators and would possibly nonetheless have some lingering results which cap the beneficial properties over 5669.

The subsequent main goal is the 6124 stage. This can be a measured transfer the place the 2022-2024 rally can be equal in dimension to the 2020-2022 rally. It’s unlikely to be reached this aspect of the election, however is a attainable vacation spot in some unspecified time in the future on this bull market.

5638 and the 5669 are main resistance factors.

5390 and the August low of 5119 are preliminary helps.

The August bar will full the upside Demark exhaustion rely. It could have performed out already with the correction of almost 10%, however its impact may linger and restrict rallies forward of the election.

S&P 500 Weekly

Final week’s article highlighted the necessity for a “greater low, greater excessive and better shut over 5344, ideally 5400” to verify a reversal. These have been offered emphatically in a really bullish weekly bar. The shut on the highs suggests the rally will observe by means of early subsequent week.

The comparability with the preliminary drop from the 2022 high (highlighted) remains to be legitimate, however much less compelling with this week’s robust motion. A big drop subsequent week can be wanted to maintain this comparability related,

Preliminary resistance is available in at 5566 and is prone to be examined early subsequent week.

The 20-week MA and low of final week are preliminary assist at 5324.

Subsequent week can be bar 2 (of a attainable 9) in a brand new upside Demark exhaustion rely.

S&P 500 Each day

The S&P500 is sort of again the place the 3-day crash (if we will name it that) originated at 5566. It is apparent resistance, however so was the 5390-400 space which was reduce by means of final week prefer it was nothing. That is comparable motion to early November ’23 and to early Might ’24 when the rally gapped over resistance factors and maintained robust momentum.

Rallies are likely to sluggish after they attain the world of the previous high and a clear break of 5669 seems to be unlikely. Count on shallow dips till this stage is reached.

5566-85 is the primary resistance, then the 5669 peak.

On the draw back, the hole at 5500 is potential assist, adopted by 5463-70 on the excessive quantity space. The 5390-400 space remains to be related; a break under this stage would put the restoration into query.

An upside Demark exhaustion can be on bar 7 (of 9) on Monday. A response is commonly seen on bars 8 or 9 which implies a pause/dip will get extra possible from Tuesday onwards.

Drivers/Occasions

The info was so good this week, a 50bps reduce in September has been priced out and the chances of a 25bps transfer have risen to 75%. US Core PPI got here in at 0.0% when 0.2% was anticipated, CPI stayed at 0.2%, however most necessary of all, Unemployment Claims got here in decrease than anticipated at 227K, a way from the hazard space of 250K. Panic over the labour market appears untimely. Importantly, yields moved decrease once more, this time for the best causes (low inflation).

Information subsequent week is on the quiet aspect and will permit the present transfer greater to proceed. FOMC Minutes are due for launch Wednesday whereas Thursday will deliver PMIs and Unemployment Claims – the stronger the higher for the S&P500. Fed Chair Powell is scheduled to speak on the Jackson Gap Symposium on Friday. Whereas no surprises are anticipated, it is going to be fascinating to listen to the Fed’s view on current occasions; will they push again on the dovish repricing and expectations for aggressive cuts? In all probability not.

Whereas the information could also be constructive, considerations over valuations, the financial system and the election may cap the upside. Keep in mind the July high shaped on excellent news (CPI), and the August backside got here when issues seemed their worst. The response to information usually is determined by the technical context (positioning).

Possible Strikes Subsequent Week(s)

The bullish greater image view is firmly intact and it appears the anticipated H2 correction has performed out already. New all-time highs are anticipated within the coming weeks, though the development above 5669 could also be restricted by the continued impact of the month-to-month exhaustion sign and considerations over the labour market/financial system. Election uncertainty can be prone to cap rallies. I am anticipating an preliminary break of 5669 will fail after which result in a a lot slower drift greater to type a wedge sample.

Brief-term, resistance at 5566-85 must be reached early subsequent week. A day by day exhaustion sign ought to then result in a pause and dip, however 5500 ideally holds to arrange continuation to 5669 the place an extended consolidation is probably going. Assuming this situation performs out fairly nicely, I’d purchase close to 5500 and add if 5463-70 is reached.

Ought to 5390-400 break, it could imply my conclusions of a powerful transfer to 5669 are mistaken and the S&P500 remains to be in a correctional section. Though this could be disappointing, it may present a possibility to purchase throughout a deeper dip and I’ll get a second probability in any case.