SPX Approaches Major Resistance at 4090-4177 after FOMC
Updated
SPX Approaches Major Resistance at 4090 - 4177
Fast approaching a major resistance zone where plentiful supply resides, SPX has rallied hard since the presser after the FOMC meeting on Wednesday, July 27, 2022. SPX rallied about 2.62% that day, with the Nasdaq 100 rallying nearly 4.5%. Conflicting interpretations of unscripted remarks at the FOMC presser have led many to interpret the Fed Chair's comments as more dovish than expected, which has been widely attributed as the reason for the bullish turn in major indices.
Key Resistance Levels Just Overhead
The blue rectangle on the published chart above shows where price had consolidated for about eight days from May 27 to June 8 of this year. This level also aligns with major swing highs and lows including the swing lows on February 24, March 8, March 14, and May 2, and the swing high on May 17. So one may reasonable expect that price could be rejected at such levels, even if temporarily, and pullback from such levels to consolidate the recent gains.
Important Fibonacci targets also are approaching. These include the following Fibonacci-derived resistance levels:
Key Fibonacci Resistance Levels on SPX daily chart as of July 28, 2022
Momentum Nears the March 29, 2022 Level
Yesterday, July 28, 2022, RSI reached 62.61 on the daily chart. It will likely reach the 64-66 range on the same time frame on July 29, 2022. This is very near March 29, 2022 peaks where RSI topped at 65.27 after turning all the key moving averages on the daily time frame upward again. The March 2022 bear rally even turned the weekly 21 EMA to upward sloping as well for a 2-3 weeks. RSI hit 65.27 on March 29, 2022 after a powerful 11.56% rally off the March 8, 2022 low. The chart below highlights RSI resistance based on the March 29, 2022 peaks.
RSI on SPX daily chart as of July 28, 2022
Near-Term Trends Have Shifted Upward
While SPX is approaching major resistance, short-term and intermediate term trends have turned upward. On the daily chart, the 8, 21 and 34 EMAs are now sloping upwards with price well above them all, the 8 EMA has crossed above the 21 EMA, and the 21 EMA appears likely to cross the 34 EMA within a day. The chart below shows these three key moving averages.
8 EMA, 21 EMA and 34 EMA on SPX daily chart as of July 28, 2022
On the weekly chart, the weekly trend remains neutral to bearish still, with price just below the 21-week and 34-week EMAs, which have been flattening out given the recent rally and are no longer previously downward sloping.
Bear Rallies and Major Trend Reversals May Appear Similar
Powerful bear rallies and major trend reversals off of long-term lows can appear quite similar. The current rally from June 16, 2022, to July 29, 2022, has gained over 12%, and likely may reach a 13% gain tomorrow. This has exceeded almost everyone's expectations and once again caused many experts to pronounce that the bottom has been made in equity markets this year and that lasting bull markets lie ahead.
While a bull market may come, it remains unclear whether a powerful bear rally definitely signals the start of another extended bull, especially with inflation remaining persistently high, negative GDP prints, and Federal Reserve rate hikes continuing even if at a slower pace. Even if it were to retrace over half the decline since January 2022's all-time high, such a rally would remain typical of bear markets and insufficient to draw any serious conclusions. The 2-year bear market of 2000-2002 saw bear rallies in the Nasdaq 100 that reached 32-60% on four separate occasions.
For the time being, it remains prudent to follow price, which is showing that near-term trends have shifted. But at this extended level, going long does not make sense give the key resistance levels just overhead.
Note: This post is not intended to present a trade idea but rather to present technical analysis of the current price action in this security.
DISCLAIMER: This post is published solely for educational / entertainment purposes and does not constitute financial advice or an investment recommendation and cannot account for any person's particular financial circumstances. The author would not want other investors / traders to lose money by relying *solely* on this idea rather than doing their own due diligence. Before entering any trade, please evaluate the risks of (i) the instrument / security being traded, (ii) the type of trade and its timeframe, (iii) risks inherent in that type of trade and its time frame, (iv) the inherent risks of shorting securities (presenting unlimited risk without hard stops in place), (v) the inherent risks of trading options, leveraged ETFs, and cryptocurrencies, and (vi) all financial risks arising each person's personal financial circumstances.
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ES1!
Fast approaching a major resistance zone where plentiful supply resides, SPX has rallied hard since the presser after the FOMC meeting on Wednesday, July 27, 2022. SPX rallied about 2.62% that day, with the Nasdaq 100 rallying nearly 4.5%. Conflicting interpretations of unscripted remarks at the FOMC presser have led many to interpret the Fed Chair's comments as more dovish than expected, which has been widely attributed as the reason for the bullish turn in major indices.
Key Resistance Levels Just Overhead
The blue rectangle on the published chart above shows where price had consolidated for about eight days from May 27 to June 8 of this year. This level also aligns with major swing highs and lows including the swing lows on February 24, March 8, March 14, and May 2, and the swing high on May 17. So one may reasonable expect that price could be rejected at such levels, even if temporarily, and pullback from such levels to consolidate the recent gains.
Important Fibonacci targets also are approaching. These include the following Fibonacci-derived resistance levels:
- 4227: the .50 retracement of the entire decline from the all-time high on January 4, 2022, to the low on June 17, 2022
- 4221: the 1.618 projection of the first wave off the lows starting June 17
- 4137: the .50 retracement of the March 29 to June 17 decline
- 4114: the 1.272 projection of the first wave off the June 17 low as projected from the low on July 14
Key Fibonacci Resistance Levels on SPX daily chart as of July 28, 2022
Momentum Nears the March 29, 2022 Level
Yesterday, July 28, 2022, RSI reached 62.61 on the daily chart. It will likely reach the 64-66 range on the same time frame on July 29, 2022. This is very near March 29, 2022 peaks where RSI topped at 65.27 after turning all the key moving averages on the daily time frame upward again. The March 2022 bear rally even turned the weekly 21 EMA to upward sloping as well for a 2-3 weeks. RSI hit 65.27 on March 29, 2022 after a powerful 11.56% rally off the March 8, 2022 low. The chart below highlights RSI resistance based on the March 29, 2022 peaks.
RSI on SPX daily chart as of July 28, 2022
Near-Term Trends Have Shifted Upward
While SPX is approaching major resistance, short-term and intermediate term trends have turned upward. On the daily chart, the 8, 21 and 34 EMAs are now sloping upwards with price well above them all, the 8 EMA has crossed above the 21 EMA, and the 21 EMA appears likely to cross the 34 EMA within a day. The chart below shows these three key moving averages.
8 EMA, 21 EMA and 34 EMA on SPX daily chart as of July 28, 2022
On the weekly chart, the weekly trend remains neutral to bearish still, with price just below the 21-week and 34-week EMAs, which have been flattening out given the recent rally and are no longer previously downward sloping.
Bear Rallies and Major Trend Reversals May Appear Similar
Powerful bear rallies and major trend reversals off of long-term lows can appear quite similar. The current rally from June 16, 2022, to July 29, 2022, has gained over 12%, and likely may reach a 13% gain tomorrow. This has exceeded almost everyone's expectations and once again caused many experts to pronounce that the bottom has been made in equity markets this year and that lasting bull markets lie ahead.
While a bull market may come, it remains unclear whether a powerful bear rally definitely signals the start of another extended bull, especially with inflation remaining persistently high, negative GDP prints, and Federal Reserve rate hikes continuing even if at a slower pace. Even if it were to retrace over half the decline since January 2022's all-time high, such a rally would remain typical of bear markets and insufficient to draw any serious conclusions. The 2-year bear market of 2000-2002 saw bear rallies in the Nasdaq 100 that reached 32-60% on four separate occasions.
For the time being, it remains prudent to follow price, which is showing that near-term trends have shifted. But at this extended level, going long does not make sense give the key resistance levels just overhead.
Note: This post is not intended to present a trade idea but rather to present technical analysis of the current price action in this security.
DISCLAIMER: This post is published solely for educational / entertainment purposes and does not constitute financial advice or an investment recommendation and cannot account for any person's particular financial circumstances. The author would not want other investors / traders to lose money by relying *solely* on this idea rather than doing their own due diligence. Before entering any trade, please evaluate the risks of (i) the instrument / security being traded, (ii) the type of trade and its timeframe, (iii) risks inherent in that type of trade and its time frame, (iv) the inherent risks of shorting securities (presenting unlimited risk without hard stops in place), (v) the inherent risks of trading options, leveraged ETFs, and cryptocurrencies, and (vi) all financial risks arising each person's personal financial circumstances.
SPXSPX500USDSP500SPYES1!Note
SPX closed its weekly bar just below the weekly Kijun line on the Ichimoku Cloud. This aligns with the Fibonacci level shown above at 4137 SPX, which is the .50 retracement of the March 29 to June 17 decline). This makes sense because the Kijun is the mid-point between the 26 period high and low, and the .50 retracement is the mid-point between the March 29 high and the June 17 low.
Note
SPX continues to struggle in the zone: 4114-4177. SPX catches a bid right near 4100 and then can't progress much beyond about 4137 this morning. Although upward momentum has temporarily been lost, one more push higher could occur before a deeper pullback (or perhaps a reversal of sorts -- we will have to wait and see).Note
Note
Check out this educational article on VIX if you have time and share any comments or charts! 
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