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GoNoGo Indicators - Go long-term but No Go short-term

GoNoGo Charts indicators revolve around the concept that momentum goes hand in hand with trend analysis. The velocity of price change identifies the dominant trend and the sustainability and conviction level of the trend.


Rising momentum signals the continuation of an uptrend, and declining momentum warns of a weakening trend or an impending trend reversal. Trend identification is the single most important part of technical analysis.


Merging statistical analysis (velocity of price change) with the basic principles of technical analysis (trend identification, momentum, etc.), the GoNoGo technical indicator via visual color prompts determines if the market or security is ready to “Go” (buy) or “NoGo” (delayed buying).


Many technical indicators are complex due to the mathematical models involved and are open to various interpretations. GoNoGo Trend indicators simplify decision-making, with only two signals – Go (buy) or NoGo (delayed buying).


When the trend is the strongest, it notifies the trader by painting the price bar blue. When slightly less bullish, the color turns to aqua. Amber bars represent an uncertain or no trend, often occurring when the trend transitions from bull to bear and vice versa. Pink bars denote bearishness, and dark purple when the bearish trend accelerates.


SPX GoNoGo (daily data) short-term interpretation:


From a near-to-medium-term perspective, the SPX daily candles shifted from the amber color (no trend) on 8/15/23 to a pink bar (No Go) on 8/16/23.


The NoGo signal comes after the Mar 2023 uptrend breakdown on 8/15/23 and the 50-day moving average violation. Although the primary uptrend from the Oct 2022 bottom remains intact, the mid-Aug 2023 breakdown and the pink bars (No Go) warn of further volatility before resuming the Oct 2022 primary uptrend.


Interestingly, three prior SPX corrections - the 8/16/22 to 10/13/22 deep correction, the 12/13/22 to 12/22/22 brief and shallow consolidation, and the 2/2/23 to 3/13/23 consolidation, showed similar GoNoGo signs ahead of final market bottoms.


The Aug-Oct 2022 deep correction of 19.28% occurred on the backdrop of the GoNoGo charts painting a NoGo pink bar on 8/32/22 and the Jun 2022 uptrend breakdown on 9/2/22.


The Feb-Mar 2023 9.21% consolidation occurred because of the Oct 2022 uptrend breakdown on 2/24/23 and a NoGo pink bar signal on 2/28/23.


A third consolidation from 12/13/22 to 12/22/22 of -8.20% led to a NoGo pink bar bearish signal on 12/19/22, which was late into the consolidation phase.


The question is whether the 10/3/23 low at 4,216.45 is a market bottom or a temporary low.


Based on the current pink bar (No Go), SPX must develop the necessary technical base before the next aqua or blue bar (Go) occurs.

SPX GoNoGo (monthly data) long-term interpretation:


Except for the brief 1-mo amber bar in Mar 2020, SPX has consistently maintained blue (Go) and aqua bars (moderate bullish).


Despite the Jul to Oct 2023 and the recent Sept to Oct 2023 pullbacks, SPX has maintained above two pivotal uptrends – the 2009 uptrend (3,216) and the 2011 uptrend (3,886), confirming a structural bull trend. Also, SPX has recently returned to above its 10-mo ma (4,271) and the 30-mo ma (4,161), and both longer-term moving averages are trending up.


Although further probing of the 10-mo and 30-mo moving averages is possible the above favorable technical developments strongly suggest the structural trend in SPX remains bullish and sustainable.


A surge above the Jul 2023 reaction high (4,607.07) and preferably above the Jan 2022 all-time high (4,818.62) would further convince investors of the resumption of the structural bull trend.


Conclusion:


The daily GoNoGo chart currently shows a pink bar (No Go), confirming the 7/27/23 pullback is ongoing and needs time to determine the next direction. However, the 3-month consolidation phase nears a critical phase as SPX challenges key resistance along the 50-day ma (4,399) and the 9/21/23 gap-down (4,401). The outcome of this test can help to decide the next directional trend.


An interesting point worth noting. The spread (172.48) between the 50-day ma (4,399.12) and 200-day ma (4,226.64) remains wide. It would imply time is needed for the spread to contract before the next trend can develop. Also, because SPX (4,373.20) currently trades within a rising 200-day ma and a declining 50-day ma trend, it hints at a neutral near-to-medium-term technical outlook. The risk/reward profile is even as the risks to the downside is the Oct 2023 low (4,216.45) or -156.75 points, and the upside potential is the 9/1/23 high (4,541.25) or +168.08 points.

The monthly GoNoGo chart shows a blue bar (Go), confirming the structural uptrends, coinciding with the 2009/2011 uptrend channels remaining firmly intact. The May 2013 breakout confirmed the 2000-2013 structural sideways trading range trend has ended, and a new structural bull trend has begun.


Although the structural bull is over ten (10) years old, the long-term bullish trend can continue as structural trends in U.S. stocks can last for 8-20 years possibly placing the current structural bull trend at the halfway mark.


Nonetheless, it is reasonable to expect countertrend corrections and even cyclical bear declines within a structural bull. The 10-mo and 30-mo moving averages at 4,271 and 4,161 offer initial support. The 2011 uptrend at 3,886 provides intermediate-term support, and the 2009 uptrend at 3,216 offers longer-term support. The ability of SPX to maintain above these supports suggests the May 2013 structural bull can continue.


Source: Chart courtesy of StockCharts.com

Source: Chart courtesy of StockCharts.com

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