S&P 500 Technical Analysis: Z-Score HMA Indicator OutlookOutside of the obvious news on Tarriffs, let's just focus on technicals for a moment:
In case you’re in a hurry:
My HMA Z-Score Probability Indicator is currently signaling overbought conditions.
The Z-Score has moved into the upper green zone, a level where reversals have historically occurred.
Hull Moving Average (HMA) remains upward for now, but is approaching a potential flattening point.
Price continues to respect a descending trendline, indicating resistance remains intact.
Unless the trendline is broken with conviction, the probability favors a bearish reversion in SPY.
HMA Z-Score Indicator Forecast: SPY Nearing Reversion Risk
This week, my HMA Z-Score Probability Indicator is signaling a statistically significant overbought condition in SPY. In case you are unfamiliar, this tool blends the statistical power of the Z-Score with the responsiveness of the Hull Moving Average to give us high-probability momentum and mean reversion setups.
Let’s break down what it’s showing right now and why a pullback may be imminent.
Z-Score in the Green: What That Means
The Z-Score component of my indicator is now in the upper green zone, which I’ve defined as statistically overbought territory. This isn’t arbitrary, it's based on historical distribution thresholds that flag when price has moved too far, too fast from its average.
In past instances when the Z-Score has reached these levels, the market has often reverted back toward the mean. It's not guaranteed, of course but the odds shift. This is one of the key features of my indicator: identifying these moments where the risk/reward tilts away from chasing price and toward anticipating a reversion.
HMA as a Momentum Filter
The Hull Moving Average (HMA) provides the trend context in this setup. Right now, the HMA is still pointing upward, but it’s starting to show early signs of rounding off. If it begins to flatten or turn downward while the Z-Score remains elevated, that would act as a confirmation of a momentum shift and strengthen the case for a pullback.
The HMA has consistently helped filter out false Z-Score signals when the trend is strong. But when both tools start aligning, that's when I pay closer attention.
Descending Trendline Holding as Resistance
On the chart, I’ve drawn a descending trendline connecting recent swing highs. So far, price has failed to break through this line, continuing a pattern of lower highs.
As long as price respects that line, it suggests sellers are still in control of the short-term structure. If SPY gets rejected again here, particularly while the Z-Score is elevated, the probability of a downside move increases significantly.
Bearish Bias: What the Data Suggests
The core logic behind this setup is based on reversion to the mean. When price extends beyond typical volatility bands (as measured by the Z-Score) and momentum stalls (as reflected by the HMA), it often precedes a return to more normalized levels.
Right now, we have:
A Z-Score reading in overbought territory,
A potentially topping HMA,
Resistance still holding at the descending trendline.
That’s a confluence of signals that, in my indicator's design, suggests a bearish reversion is more likely than a continuation.
What I’m Watching This Week
To confirm the setup, I’ll be watching for:
HMA flattening or beginning to roll over,
Break of recent short-term support to trigger downside momentum.
If these conditions start stacking up, the short bias becomes actionable. If instead we see a breakout above the trendline with conviction and volume, I’ll re-evaluate because no indicator is bigger than price.
The HMA Z-Score Probability Indicator is designed to anticipate high-probability turning points, and right now, it's signaling elevated risk for a short-term reversal in SPY.
As always, these are probabilities, not certainties.
