SPX S&P 500 Monthly Chart with 12 MA Cross; 1-Year Cyclical Bear Market Challenged as Bulls Try to Push Higher

If you were stranded on a desert island, and could only take one indicator along to tell you if the stock market was bullish or bearish, it would be the SPX 12-month MA now at 4016.

The S&P 500 failed through the 12-mth MA a year ago signaling the ongoing cyclical bear market but that multi-month downtrend is now called into question. The chart shows happy bears at the Thanksgiving table in November with price below the 12-mth MA signaling full steam ahead for the cyclical bear market.

During December, however, cracks form in the bear thesis. Price tags the 12-mth MA threatening to move above only to receive a spankdown with the bears proclaiming that they continue to run the show. The new year begins with bears growling but that changes quickly as the uber negative sentiment opens the door to a big rally higher.

The bulls push the SPX above the 12-mth MA in January to end the month at 4077 now signaling a cyclical bull market ahead. Since the cyclical bear market has been in place for about a year, it is not wise to simply run with the latest flavor and say the bear market is over. There needs to be follow-through where the bulls need to prove that they got game.

February begins and price remains above the 12-mth MA for the entire month so far so the bulls have their chests puffed-out. The candlestick is in progress, however, and the month still has 6 trading days remaining. EOM is 2/28/23 on the following Tuesday. A lot can happen to a chart in 6 days so the jury remains out on the cyclical bull versus bear call.

The cyclical bear market call remains in place for now but in 6 trading days if price remains above the 12-mth MA, a new cyclical bull market will have to be ordained (it will be 2 solid months of the bullish signal).

The SPX dropped to 4037 last week only 21 points from the critical 12-mth MA at 4016. That is in the neighborhood so it is very likely that price will settle the score and come down to tap 4016 where the important bounce or die decision, that will probably impact the US stock market for the remainder of the year, will occur.

In a couple weeks, if the SPX is above 4016, it is blue skies and rainbows for the bulls, Mr Blue Sky, with stocks floating higher going forward with a new cyclical bull market in play. If the SPX is below 4016 as March begins, it opens the door to major trouble as the year progresses and the cyclical bear market prevails. If the SPX drops below 3953 over the next couple weeks, it is lights out, sayonara, the stock market will collapse, people will become Paranoid.

As the cyclical bear market prevailed in 2022, price pulls the shorter-term moving averages lower faster than longer-term moving averages. Thus, price drops and the 10-mth MA follows and then the 12-mth MA follows the 10 lower. In November, you see price closing the month above the 10-mth MA a critical signal hinting that bottoming-behavior is likely on the come.

When the SPX places a major top, like a year ago, price falls though the 10 MA first then the 12 MA ushers-in Armageddon. The 10-mth MA at 3953 currently remains key. If 3953 is lost, as mentioned above, the US stock market is in serious trouble and you are likely to witness a very special negative event about to occur.

The stage is set. SPX 4016 decides the fate of the US stock market going forward. If the bears start growling, and take out 3953, they will be ripping off limbs. The trading week begins on Tuesday with SPX starting at 4079. 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.

Note Added 10:31 AM EST: The SPX 50-week MA is at 4016 like the 12-mth MA. Wow. Two powerhouse support levels. No doubt they will act as a back test support level. The 4016 is the stock market's Gettysburg. This is where the battle between the north and south, er, bulls and bears, will be fought winner take all. Keybot the Quant remains long but has been itching to flip short for the last week.

Note Added Ash Wednesday Morning, 2/22/23: Wall Street analysts, economists and central bank officials are singing in unison that a recession is not in the cards going forward. The PMI Services Index pops above 50 so the services sector is being waved as the banner of great times ahead. US Existing Home Sales are at the lowest level in over 12 years but hey, look at those services. Stocks collapse yesterday with the major indexes losing from -2% to -3%. The SPX falls through the 12-mth MA at 4010-4013 so all Hell broke loose. Watch the SPX 4010-4013 bull/bear line in the sand since it tells you the story going forward. Price is at 3997 before the Wednesday session begins. The SPX 10-mth MA is at 3945. If 3945 fails, it will be a bloodbath. Watch the banks. Also, UTIL 927 this week; if it is lost, stocks will plummet. If UTIL is below 939 when this week ends, stocks will plummet next week. Lots of moving parts currently.