The S&P 500 (SPY) reached the 5000 milestone this week. I really thought it’d fall simply quick and in final weekend’s article speculated sentiment was getting “too bullish” simply as seasonality shifted destructive. Clearly, this wasn’t the case and the bullish technicals trumped my hypothesis.
I nonetheless assume we may get a correction in February, however maybe I’m overthinking issues. There have been 14 greater weekly closes out of the final 15 which hasn’t occurred for 52 years. In the event you add the very fact the S&P 500 has gained 20% in these 15 weeks, it’s the first time this has ever occurred. That is an uncommon setting and no-one can say how “loopy” issues will get.
This week I’ll as soon as once more establish key spots the place the S&P 500 ought to maintain on dips if the uptrend is to stay robust or roll over right into a reversal. Quite than speculate on tops we are able to shift impartial/bearish when there’s actual technical proof to take action. Numerous strategies might be utilized to a number of timeframes in a top-down course of which additionally considers the main market drivers. The goal is to offer an actionable information with directional bias, vital ranges, and expectations for future value motion.
S&P 500 Month-to-month
The February bar has moved far sufficient for a return beneath the January 4931 excessive to be thought of a purple flag. Dropping beneath 4853-61 would sign a correct bearish shift.
As talked about final week, seasonality in February shifts weaker and the S&P 500 has closed greater solely 50% of the time when it positive aspects greater than 10% in November and December and likewise closes greater in January. Moreover, the second half of February is the one of many weakest two-week intervals of the 12 months.
Now that the S&P 500 is in “blue sky” at new all-time highs, Fibonacci extensions and measured strikes act as a information for targets. After almost fifteen years of drawing Fibs, I’ve discovered some work significantly better than others. The 1.13% extension at 4991, for instance, is just not one thing I put a lot religion in. Nonetheless, the 200% extension of the July-October correction in confluence with the 90% measured transfer (90% is a measurement I exploit loads in Elliott Wave) may very well be extra important. This is available in at 5107-5110.
As talked about earlier, 4853-61 is a crucial stage on the draw back. 4818 is the following main stage on the earlier all-time excessive.
There might be a protracted look forward to the following month-to-month Demark sign. February is bar 3 (of a doable 9) in a brand new upside exhaustion depend.
S&P 500 Weekly
For the fifth week in a row, a powerful weekly bar fashioned with the next low, greater excessive and better shut. Comply with by way of is once more probably within the first half of subsequent week.
The rally has now reached the highest of the channel at 5025. There might be a response in some unspecified time in the future subsequent week and we are able to watch carefully for a change in character. As soon as extra, a key change could be new lows of the week on Thursday and Friday as a substitute of the brand new highs we hold seeing just lately.
Channel resistance is round 5025. The identical Fib targets from the month-to-month chart apply so 5107-5110 is the following goal.
There is no main weekly assist shut by, with the small weekly hole from 4842-44 the primary vital space.
An upside Demark exhaustion depend might be on bar 6 (of 9) subsequent week so no exhaustion sign will register. A response is often seen on weeks 8 or 9.
S&P 500 Day by day
Friday’s robust session broke the 5000 stage convincingly and closed proper on the highs. This transfer ought to proceed, no less than within the early a part of subsequent week, and 5000 is now near-term assist.
The rally has reached the highest of the day by day channel from the January low in addition to the massive weekly channel. Up to now, each time it has touched the channel excessive it has pulled again barely or paused. Breaking a earlier day’s could be a change value noting.
Other than the twin channels at 5025, there is no such thing as a resistance.
5000 is the primary assist, however not related to the well being of the development. 4975 is extra vital and a break by way of this stage would take a number of the most bullish choices off the desk (however would but not affirm a high is in). Channel assist is round 4930 on Monday and rising 10 factors per session.
An upside Demark exhaustion depend might be on bar 8 (of a doable 9) on Monday which suggests we may even see a response on Monday or Tuesday.
This week was significantly quiet. Fed audio system mentioned nothing new, knowledge was in-line and bond auctions had been unremarkable. CPI revisions on Friday balanced out with no important modifications.
Subsequent week ought to convey extra motion as CPI is launched on Tuesday. The large query is whether or not the tick up in financial knowledge over latest months might be mirrored in inflation readings. The subsequent huge query is whether or not it actually issues to the S&P 500. In any case, the latest development of upper yields and reducing odds of Fed easing have not dented the rally in any respect. I do assume this stuff nonetheless matter, but it surely would possibly want some sort of jolt to get the market to pay attention.
Retail Gross sales, Empire State Manufacturing and Unemployment Claims might be launched on Thursday.
PPI and Shopper Sentiment are launched on Friday.
Possible Strikes Subsequent Week(s)
The S&P 500 blew by way of 5000 and closed the week strongly. Friday’s motion supplies good odds for an additional excessive above 5030 early subsequent week.
That mentioned, the rally has run into some resistance on the high of the weekly and the day by day channels. With a day by day exhaustion sign on account of come into impact on Monday or Tuesday, there are causes to consider a brand new excessive above 5030 fails.
How any failure performs out might be vital for the remainder of the week and probably your entire development. Latest dips and corrections have been minimal. Typically all we see is a day by day “inside bar” earlier than continuation greater. In essentially the most bullish eventualities, the 5000 stage ought to maintain.
Bears may get some traction with a break by way of 5000, and extra importantly 4975. Most vital of all, search for new weekly lows on Thursday and Friday and an in depth on the low of the weekly vary. This may be a change in character and supply some a lot wanted proof to assist speculative high calls.
Information Sources: Google Information, Google Developments
Photos Credit score: Google Photos