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SPX Long, Medium, and Short-term Technical Outlooks

The Fed remains accommodating with its monetary policies and Congress continues to roll out massive fiscal stimulus programs. Although rising inflation remains a concern for investors economic numbers are suggesting that it may be transitory. The COVID-19 pandemic also remains on the mindsets of many as we head toward the fall timeframe. However, it may not lead to a full shutdown as we experienced last year. Nonetheless, the global vaccine rollout and the Delta variant will be closely monitored in the next few weeks.


So, what are the technical outlooks for the US stock market as we enter the late-summer to the early-Fall timeframe?


SPX short-term trend (intra-day chart)


Despite the rally this year, SPX continues with its May 2021 uptrend channel between 4,345 and 4,505. The recent 8/6/21 breakout above 4,429.77 suggests +57.46 or an SPX target of 4,487.43, near-term. The 7/23/21 breakout above 4,393.68 also suggests +160.55 points or a target of 4,554.23, medium-term. The key initial support rises to 4,423-4,430 (8/6/21 breakout), and below this to 4,373-4,394 (7/23/21 breakout and 7/23 and 8/3/21 lows), 4,345 (Bottom of May 2021 uptrend channel), 4,233-4,257 (7/19/21 low and the mid/late Jun 2021 breakouts), 4,164-4,168 (6/3 and 6/21/21 lows), and 4,057-4,061 (5/12 and 5/19/21 lows). Volume has declined into the recent rally, suggesting a lack of traders involved during the summer months.


SPX intermediate-term trend (daily chart)


The negation of the broadening top above 3,700 during Dec 2020 is technically significant as this reaffirms the resumption of the structural bull trend. The V-pattern breakout above 3,393.52 continues to suggest +1,201.66-points or an SPX projection of 4,595. The key initial support moves up to 4,238-4,326 (50-day ma, Jun 2021 2-month triangle breakout), and below this to 3,905-3,981 (200-day ma, top of the 2018 broadening top, and Mar 2021 breakout). The RSI indicator has been reliable in identifying overbought and oversold conditions in SPX over the past two years. SPX is overbought in the low-to-mid 70s and extremely overbought in the high-80s to low-90s. SPX is oversold in the mid-30s to low-40s and extremely oversold in the 20-30. SPX is headed to a retest of its previous overbought levels at 72-74.5, near-term, and above this to 79-83, intermediate-term. Does this imply SPX can rally to 4,595 and achieve its V-pattern breakout target this year?


SPX long-term Generational Trend (monthly chart)


In the past 100-years, 3 very long-term generational trends are evident in SPX: (1) generational lows occurred along the lower trend line (red dash lines - 1,365/1,670). Generational lows appeared every 42 to 35.5 years (i.e., Apr 1932 at 4.43, Aug 1974 at 63.54, and Feb 2009 at 735.09). (2) The middle blue dash trend line (now at 2,503) acts as an internal trendline denoting equilibrium/fair value, possibly establishing the structural trend. (3) The upper green dash trend line, currently rising near 4,865, represents the generational highs (i.e., Sep 1929 - 31.30 and Jul 2000 - 1,517.68). The duration between the two-generational highs is nearly double that of the generational lows, spanning nearly 71-year. It is also uncanny the two speculative structural bull rallies (i.e., 1921-1929 roaring 20s and 1982-2000 tech/telecom bull) led to structural bears (i.e., 1929-1949 and 2000-2013). Connecting the previous two-generational highs (1929 - 31.30 and 2000 - 1,553.11) place SPX at a level of 4,865. If SPX peaks here, either this year or next year (21-22 years), it will be far short of the prior 71-year duration for generational highs.


Source: Courtesy of Stockcharts.com

Source: Courtesy of Stockcharts.com

Source: Courtesy of Stockcharts.com

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