• 367 days Will The ECB Continue To Hike Rates?
  • 368 days Forbes: Aramco Remains Largest Company In The Middle East
  • 369 days Caltech Scientists Succesfully Beam Back Solar Power From Space
  • 769 days Could Crypto Overtake Traditional Investment?
  • 774 days Americans Still Quitting Jobs At Record Pace
  • 776 days FinTech Startups Tapping VC Money for ‘Immigrant Banking’
  • 779 days Is The Dollar Too Strong?
  • 779 days Big Tech Disappoints Investors on Earnings Calls
  • 780 days Fear And Celebration On Twitter as Musk Takes The Reins
  • 782 days China Is Quietly Trying To Distance Itself From Russia
  • 782 days Tech and Internet Giants’ Earnings In Focus After Netflix’s Stinker
  • 786 days Crypto Investors Won Big In 2021
  • 786 days The ‘Metaverse’ Economy Could be Worth $13 Trillion By 2030
  • 787 days Food Prices Are Skyrocketing As Putin’s War Persists
  • 789 days Pentagon Resignations Illustrate Our ‘Commercial’ Defense Dilemma
  • 790 days US Banks Shrug off Nearly $15 Billion In Russian Write-Offs
  • 793 days Cannabis Stocks in Holding Pattern Despite Positive Momentum
  • 794 days Is Musk A Bastion Of Free Speech Or Will His Absolutist Stance Backfire?
  • 794 days Two ETFs That Could Hedge Against Extreme Market Volatility
  • 796 days Are NFTs About To Take Over Gaming?
Another Retail Giant Bites The Dust

Another Retail Giant Bites The Dust

Forever 21 filed for Chapter…

What's Behind The Global EV Sales Slowdown?

What's Behind The Global EV Sales Slowdown?

An economic slowdown in many…

Is The Bull Market On Its Last Legs?

Is The Bull Market On Its Last Legs?

This aging bull market may…

  1. Home
  2. Markets
  3. Other

SP500: Bears Need a Lower High (Dead Cat Bounce)

Weekly time frame:

  • The decline from the April high has found a temporary halt at the support located at 2040.
  • SP 500 ended lower for the second week in a row for the first time since the beginning of the rally from the February low, however the weekly Doji is suggesting a potential rebound which should fail to reclaim the resistance located at 2074.
  • Below 2040 we would have the confirmation that the up leg from the February low is done (Assumed wave A) and consequently a larger pullback would be underway.
  • In my humble opinion a wave (B) pullback should establish a higher low.
  • Below S1 = 2040 we have the 50 wma = 2026 and S2 = 2020. I would not rule out a decline towards the 20 wma = 1994
  • If the 20 wma does not hold the next major support S3 = 1947

S&P500 Weekly Chart
Larger Image

Daily time frame:

  • On Friday after a brief dip below the 50 dma SP 500 managed to achieve a reversal day with a Hammer candlestick. This bullish price action should allow a larger rebound next week.
  • The immediate resistance is located at Wednesday's gap down = 2063 then we have the 10 dma = 2071 and the 20 dma = 2078
  • The 10 dma has crossed below the 20 dma, which is a bad omen.
  • If, as I think likely, it is an oversold bounce it should fail to reclaim the 20 dma.
  • If this scenario plays out the following down leg can conclude the corrective phase with a potential target in the range 1995 - 1947

S&P500 Daily Chart
Larger Image

  • If the expected rebound fails at the 20 dma price would be shaping the right shoulder of a Head & Shoulder. This bearish pattern has a measured target at 1065

S&P500 Daily Chart 2
Larger Image

  • Daily oscillators are bearish although the oversold Stochastic and RSI (5) are aligned with the short-term scenario of an oversold bounce

S&P500 Daily Momentum Chart
Larger Image

  • The extreme high reading of the CBOE Equity Put/Call ratio is also strongly suggesting that next Monday odds should favor follow through to the upside

CBOE Options Equity Put/Call Ratio Daily Chart

60 minute time frame:

  • The bearish crossover of the 50 hma below the 200 hma is increasing the odds of a larger decline
  • On Friday SP 500 completed a falling wedge hence it is probable that from the April high price has concluded the down leg with a Double Zig Zag.
  • SP 500 has an immediate resistance at the 50 hma = 2059. The next resistance is located at Wednesday's gap down at 2063
  • If the current rebound is a wave (B) it should top in the range 2072 (200 hma) - 2075 (0.5 retracement)
  • If price breaks the falling trend line from the April top it would be game over for the bears

S&P500 60-Minute Chart
Larger Image

In the technical front:

  • The SP 500 % of stock above the 50 dma is in a clear down trend with plenty of room to the downside before crossing the oversold zone

S&P500 Stocks Above 50dma Daily Chart

  • The NYSE Summation Index has a new sell signal in force. Often the next buy signal occurs when the RSI enters the oversold zone

McClellan Summation Index Daily Chart
Larger Image

  • The ratio VIX:VXV is falling back towards the 0.800 line. Usually when the ratio falls below the 0.8 odds favor a reversal

VIX versus VXV Daily Chart

 

Back to homepage

Leave a comment

Leave a comment