Last week was interesting with the huge +5% turnaround on Thursday and then Friday stocks relax lower again absorbing the Thursday orgy. The SPX prints the low for the year last week at 3491.58. Put 3492 on a sticky note since you will see it again in the future. As per the previous 2-hour and daily charts, the positive divergence kicked-in launching price higher. The SPX came up to test the 20-day MA resistance at 3696 (3712 HOD on Friday) where it was spanked back down.
The SPX daily chart is set up with possie d and price received the first push higher on Thursday. Money flow is making higher highs which is bullish. There is no reason for price to come back down on the daily basis since the possie d has started the move higher on the daily basis. A move back to the 20-day MA at 3696 would be expected and higher; the top band is at 3879 descending quickly.
Remember, the only caveat is news out of left field from the Federal Reserve or others. So the daily chart is good to go going forward for the bulls (several days of upside ahead). How does the SPX weekly chart look? Trading is 5-dimensional chess comingling the minutes, hours, days, weeks and months time frames into a coherent mosaic that itself is only fleeting.
Back to the weekly chart above. Right away, what do you see? Yes, the struggle at the 200-week MA at 3599 continues. Bulls were happy on Thursday walking around with chests puffed but they were deflated on Friday as stocks sank again on weaker commodities. Obviously, 3599 is a key line in the sand. The week ahead will identify the victor. Bears begin the week in the driver's seat at 3583 wanting to take the stock market bus to Hades perhaps to 3515-ish support or 3292-ish.
What is the next thing that sticks out on the chart? Yes, possie d. Price makes lower lows for the last 3 weeks compared to June but all the indicators are sloping upwards (positive divergence; green lines). It means the selling is exhausted and the bears are out of gas. The SPX is actually fueling-up with bull juice in the background. The chart is bullish wanting to see a multi-week rally which may be a repeat of the June-July-August fractal (blue box).
The stochastics are oversold agreeable to a rally on the weekly basis. The lower standard deviation band is violated so a move back to the middle band, which is also the 20-wk MA, at 3918, is on the table, as well as the upper band at 4325 and falling. Price is also testing the horizontal price support at 3515-ish, mentioned above, from 2 years ago. Thus, the confluence of the 200-wk MA at 3599, major price support at 3515, and the lower band at 3511, hint that this is a good place for the multi-week rally to begin and the possie d to kick into gear.
The ADX is at 31 signaling that a strong down trend remains in play but it is less than the high 30's during the June low. As the SPX makes new price lows, the strength of the downtrend is diminishing which makes the case for a bullish turnaround.
Check out the Aroon. Wow. Maximum bearishness is in play. The red bear line is at 100 maximum negativity. 100% of the bears are negative expecting more negativity. At the same time, comically, 0% of the bulls are bullish. The bulls are also 100% bearish and negative expecting nothing but doom and gloom ahead. The boat is completely loaded to the bear side and you know how that usually ends (stocks rally since there is no one left to sell; as the bears scramble to cover, the short-covering rallies can be violent to the upside).
The SPX daily and weekly charts are bullish with all systems go for a multi-week rally ahead. That is, if the Fed can keep their hawkish mouths at bay and if dirtbag Dictator Putin does not drop a nuke. A logical upside target is 3918, and dropping, going forward on the weekly basis. This information is for educational and entertainment purposes only. Do not invest based on anything you read or view here. Consult your financial advisor before making any investment decision.
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