Everyone is complaining about higher interest rates, weak economic numbers, a strengthening U.S. dollar, continued inflationary pressures, and geopolitical uncertainties in Europe (Russia-Ukraine) and Asia (China and U.S.).
Despite the above issues, the S&P 500 Index (SPX) recorded a new intra-day high for the year at 4,202.20 (5/18/23) or marginally above the prior 2/2/23 high (4,195.44). SPX also closed the week at 4,192, achieving the highest weekly close for the index since Aug 2022. SPX is now within striking distance of formidable intermediate-term resistance at 4,325.28, corresponding to the 8/16/22 reaction high.
With the strong price momentum over the past few weeks, the question remains - Can SPX finally surpass formidable resistance at 4,325.28 and set new all-time highs?
The stock market is not interested in excuses or even reasons. The index either goes up, down, or sideways based on money flows, momentum, and liquidity.
One of the key factors when applying technical analysis to trend analysis is understanding the trends across multiple time frames (daily, weekly, and monthly).
A particular chart may look enticing on a shorter-term time frame (daily chart), but when the chart changes to an intermediate-term period (weekly chart) or a longer-term time zone (monthly chart), they may differ.
It is best to work with a top-down approach from time frame-wise. The longer-term trend will often dictate how intermediate-term to short-term trends play out.
SPX GoNoGo (daily) – The daily candles have been painted blue (Strong Go) and aqua (Weak Go) bars over the past two months. When the candle color shifts to blue and aqua, this suggests the cumulative readings of all of the indicators are in bullish territory, reinforcing the continuation of the uptrend.
The daily GoNoGo bullish signals suggest it is likely that over the near-term (several days to several weeks), SPX will retest critical resistance, coinciding with the 61.8% retracement (4,311.69) from the Jan-Oct 2022 decline and the August 2022 reaction high (4,325.28).
SPX GoNoGo (weekly) – Since recording a single aqua weekly bar nearly ten (10) weeks ago, the bars have maintained blue color. The golden cross buy signal earlier in the year (Jan 2023) and the 10-week and 30-week moving averages trending higher suggest the intermediate-term outlook of higher lows and higher highs also looks promising.
SPX GoNoGo (monthly) – There has only been one (1) neutral signal on the monthly bar chart during Mar 2021 or the height of the pandemic/recession. The neutral orange bar warned of mixed signals from the monthly indicators, and it was best to wait for more confirmation before proceeding. Since then, the monthly bars have been consistently blue and aqua colors, reinforcing that the structural trend remains in an uptrend.
Interestingly, as SPX plummeted 1,327.04 points or lost 27.54% of its value during the Jan-Oct 2022 cyclical bear market decline, the monthly SPX bars maintained the aqua color. The Oct 2022 low of 3,491.58 (10/13/22) may be the SPX market bottom as it successfully rebounded from the midpoint (blue dot line) of its 2009 structural uptrend channel.
Although a potential death cross signal occurred earlier in 2023, the ability of SPX to reverse above the 10-month ma (3,986) and 30-month ma (4,040.5), with both moving average trends in uptrends also constructive. A higher high pattern above the 8/16/22 reaction high of 4,325.28 would further reinforce the resumption of the May 2013 structural bull trend.
Based on the above of GoNoGo indicators showing consistent blue (Strong Go) and aqua (Weak Go) signals across the daily, weekly, and monthly charts indicate favorable trend conditions for SPX. However, SPX nears critical resistance corresponding to the 8/16/22 reaction high of 4,425.28.
Will a confirmed breakout via a higher high pattern coupled with the continued Strong Go signals from the daily, weekly, and monthly charts signal the resumption of the May 2013 structural bull trend?