Approaching a pivotal week for the S&P
Updated
The S&P500 / ES is sitting right at a critical point which I believe will break this week or next
The weekly chart shows that the S&P is now above most key moving averages, including the 200 moving average (displayed in black), the 20 moving average (displayed in white) and the 50 moving average (displayed in yellow). Also it has broken above the upper resistance trend line (displayed in red), these are all obviously very bullish but a few major headwinds remain that may upset this upwards momentum.
Price last week touched the 100 moving average (displayed in blue) but then rejected back down to end up finishing right at the Fib Extension 0.236 level. Ironically the 100 moving average has been a menacing level that has been difficult for the S&P to break through, 7 weeks ago and 21 weeks ago exactly the same touch and rejection of the 100ma occurred. Further to this we are about to enter one of the most bearish seasonal periods of the year for the S&P, I've included a seasonality indicator in my chart which shows 3 year, 6 year and 9 year tendencies and they all have exactly the same downwards pattern starting in February. The indicator below the Seasonality scan is RVI (relative volatility index), this is good for measuring both the volatility along with direction. Inline with what the market has been doing the past few years the RVI had been generally trending up and created a support line that was largely unbroken from end 2018 - Jan 2022, and since been broken the RVI is now showing a downwards trend and instead of a support line there is a resistance level over head that price is close to approaching.
The last indicator on the chart includes Larry Williams Vix_Fix which had turned red recently (2 bars/weeks), signalling we are in historically low volatility period in the VIX, most traders know that large moves often follow periods of very low and/or contracting volatility. This last indicator also includes a display for the bond yield curve and this is currently shown in the maroon/deep red which confirms a fairly long period inverted curve which is also known as a precursor sign of recession and market sell off.
The recent closed weekly candle was an indecision candle so this week that is coming or perhaps the one that follows should tell a lot about where the market will be heading over the course of the next few months
A bullish bias would mean
Price this coming week will disregard the seasonal bearish tendency and instead break above both the 100ma and the 0.236 Fib and close the week above these levels.
A bearish bias would mean
Price has closed back below the resistance level on the chart (both price resistance & RVI resistance) and price has tracked the normal declining seasonal pattern that plays out around this time of the year.
I see more chart evidence of a coming decline than an incline but in any case we still need to wait for direction confirmation which should look like one of the above scenarios. So it is time to pay very close attention to the charts and In the week that follows the market direction confirmation signal I suspect we will see some large and fast moves of either sideline money coming into the market to cause one last blow off top before some kind of recession sell off later in the year or heavy selling as these key levels get rejected and the seasonal sell of takes hold.
The weekly chart shows that the S&P is now above most key moving averages, including the 200 moving average (displayed in black), the 20 moving average (displayed in white) and the 50 moving average (displayed in yellow). Also it has broken above the upper resistance trend line (displayed in red), these are all obviously very bullish but a few major headwinds remain that may upset this upwards momentum.
Price last week touched the 100 moving average (displayed in blue) but then rejected back down to end up finishing right at the Fib Extension 0.236 level. Ironically the 100 moving average has been a menacing level that has been difficult for the S&P to break through, 7 weeks ago and 21 weeks ago exactly the same touch and rejection of the 100ma occurred. Further to this we are about to enter one of the most bearish seasonal periods of the year for the S&P, I've included a seasonality indicator in my chart which shows 3 year, 6 year and 9 year tendencies and they all have exactly the same downwards pattern starting in February. The indicator below the Seasonality scan is RVI (relative volatility index), this is good for measuring both the volatility along with direction. Inline with what the market has been doing the past few years the RVI had been generally trending up and created a support line that was largely unbroken from end 2018 - Jan 2022, and since been broken the RVI is now showing a downwards trend and instead of a support line there is a resistance level over head that price is close to approaching.
The last indicator on the chart includes Larry Williams Vix_Fix which had turned red recently (2 bars/weeks), signalling we are in historically low volatility period in the VIX, most traders know that large moves often follow periods of very low and/or contracting volatility. This last indicator also includes a display for the bond yield curve and this is currently shown in the maroon/deep red which confirms a fairly long period inverted curve which is also known as a precursor sign of recession and market sell off.
The recent closed weekly candle was an indecision candle so this week that is coming or perhaps the one that follows should tell a lot about where the market will be heading over the course of the next few months
A bullish bias would mean
Price this coming week will disregard the seasonal bearish tendency and instead break above both the 100ma and the 0.236 Fib and close the week above these levels.
A bearish bias would mean
Price has closed back below the resistance level on the chart (both price resistance & RVI resistance) and price has tracked the normal declining seasonal pattern that plays out around this time of the year.
I see more chart evidence of a coming decline than an incline but in any case we still need to wait for direction confirmation which should look like one of the above scenarios. So it is time to pay very close attention to the charts and In the week that follows the market direction confirmation signal I suspect we will see some large and fast moves of either sideline money coming into the market to cause one last blow off top before some kind of recession sell off later in the year or heavy selling as these key levels get rejected and the seasonal sell of takes hold.
Note
So far this has played out as I expected, the bearish seasonal pattern has pushed the market down a little over 6% since the beginning of February when I original posted this chart.S&P500 is now below the 20,50 and 100 weekly moving average and also the 0.382 Fib retracement level so the chart is not looking great!
However the previous noted resistance on the chart has so far held as support and we are now approaching the last week of this seasonal bearish trend. Currently price is sitting a the bottom of a range where very heavy volume has been traded and this volume bubble remains heavy all the way down to ~3810 which is also roughly where the 0.236 Fib retracement (of previous high sits). If price breaks below there then 3 key levels have been broken, the Fib level the support line and a heavy volume support zone. I'd expect this week to have higher volatility than usual as long term position traders fight to take control of large push through these support barriers or a bounce of this key zone for another run back up.
At this stage based on economic data my assumption would be that any run back up would only result in a bear market rally and then we will see a larger sell off in the second half of this year
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