S&P 500 IndexShort
SPX 3300 relative price action
As we now hit 3,300 in the S&P500 (SPX), the below chart visualises where the index level stands relative to its recent past. The chart presents how the SPX is at a short-term extreme, similar to this time two years in Jan-18, right before the >10% drop.
Summary:
You can see this when comparing the recent moves to its 200 day moving average (200D MA). Today we are 10.5% > than its 200D MA, in Jan-18 it was 13.9% > than its 200D MA. Therefore its entirely possible to see a squeeze higher of a several percentage points, but taking a 30-60 day view, the market is highly likely to see either a pullback (worst case), or a time-based consolidation (best case).
Detail:
I have used an indicator below called a de-trended price oscillator (DPO). This indicator combines both trending and non-trending elements; an ‘oscillator’ is like a ratio, bound between an upper and lower limit (e.g. -1 to +1) and measures price relative to its recent highs/lows. However a DPO adjusts this by measuring price relative to its trend. Extreme readings therefore display an extreme short-term move within the context of its trend. I have plotted a DPO (50) and DPO (200). These are the relative moves to the 50 day MA, and 200 day MA.
For the DPO (50) we are at extremes at or above the last 4 price corrections. Each one saw a 7-15% correction. For the DPO (200) we are at the extreme right before the Jan-18 meltdown. The reason why the DPO (50) gives 4 extreme readings, and DPO (200) gives two is as follows. Because prices went nowhere for 2 years from Jan-18 to Oct-19, the DPO (50) captures all the short-term swings over this period. Whereas the DPO (200) picked up after the SPX broke out from its massive 2 year conslidation in Oct-2019. Oct-2019 technically marks a break-out, and therfore the beginning of a new long-term trend. Could this last for several quarters? It is entirely possible, but all measures show near-term extremes, even within the context of a new uptrend. Therefore we would first see a correction as the most probable move.
Summary:
You can see this when comparing the recent moves to its 200 day moving average (200D MA). Today we are 10.5% > than its 200D MA, in Jan-18 it was 13.9% > than its 200D MA. Therefore its entirely possible to see a squeeze higher of a several percentage points, but taking a 30-60 day view, the market is highly likely to see either a pullback (worst case), or a time-based consolidation (best case).
Detail:
I have used an indicator below called a de-trended price oscillator (DPO). This indicator combines both trending and non-trending elements; an ‘oscillator’ is like a ratio, bound between an upper and lower limit (e.g. -1 to +1) and measures price relative to its recent highs/lows. However a DPO adjusts this by measuring price relative to its trend. Extreme readings therefore display an extreme short-term move within the context of its trend. I have plotted a DPO (50) and DPO (200). These are the relative moves to the 50 day MA, and 200 day MA.
For the DPO (50) we are at extremes at or above the last 4 price corrections. Each one saw a 7-15% correction. For the DPO (200) we are at the extreme right before the Jan-18 meltdown. The reason why the DPO (50) gives 4 extreme readings, and DPO (200) gives two is as follows. Because prices went nowhere for 2 years from Jan-18 to Oct-19, the DPO (50) captures all the short-term swings over this period. Whereas the DPO (200) picked up after the SPX broke out from its massive 2 year conslidation in Oct-2019. Oct-2019 technically marks a break-out, and therfore the beginning of a new long-term trend. Could this last for several quarters? It is entirely possible, but all measures show near-term extremes, even within the context of a new uptrend. Therefore we would first see a correction as the most probable move.
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