S&P 500 IndexShort
1-3mo neutral, 4-6mo bearish, bullish afterward
Updated
Summary: I am bearish over the next 6 months, but extremely bullish beyond that.
Looking at the SPX Monthly chart:
Volatility has been increasing since ~Jan 2018 (see ATR). SPX bounced off of the 20 EMA, then 50 EMA, then 100 EMA as supports, even as it formed new highs. If the pattern holds, we could retest the 200 EMA as well.
Staying in the price channel, we MAY hit another high around $3500 before the Nov election, but will more likely form a head and shoulders by ranging around $3200 during Aug/Sep. Either way, I would expect a MAJOR selloff from Dec 2020 until Feb/Mar 2021.
Possible bottoms for that selloff:
- Bottom of the triangle price channel at around $2100.
- Finding support at the 200 EMA as it did when testing the previous EMAs. This would first LOOK like a breakout of the price channel in Apr/May 2021, but then bounce off of the 200 EMA in Jun 2021 at around $1800-$1900 before re-entering the channel.
If either of those bottoms hold, I would expect to retest the 100 EMA as resistance around $2400 by the end of 2021, and am bullish after that.
Support for this idea:
- Weekly chart shows the 20 EMA has bearishly crossed the 50 EMA, with the 50/100/200 EMAs relatively flat. This supports a slowdown over the next month as the longer EMAs start to turn down too.
- Daily chart shows a huge 5% drop today, with slightly bullish 20/50 EMAs and slightly bearish 100/200 EMAs. This supports short-term consolidation.
- This bullet is not technical analysis, but there's a Presidential election this year, and as long as Trump remains an underdog businesses will be "scared" of returning regulations in the coming year, therefore investors will assume a downturn IF Biden wins. I am NOT predicting a winner nor predicting any specific policies, but I feel there is a broad assumption that Trump would continue to gut regulations and cater to the market above all else, while Biden would not.
When do I throw this analysis in the trash?
- If we rebound from today's selloff and reach the top of the channel before August, there is probably enough buying pressure to break out and treat the channel as support instead. Unlikely, but 2020 has been full of surprises, so...
Looking at the SPX Monthly chart:
Volatility has been increasing since ~Jan 2018 (see ATR). SPX bounced off of the 20 EMA, then 50 EMA, then 100 EMA as supports, even as it formed new highs. If the pattern holds, we could retest the 200 EMA as well.
Staying in the price channel, we MAY hit another high around $3500 before the Nov election, but will more likely form a head and shoulders by ranging around $3200 during Aug/Sep. Either way, I would expect a MAJOR selloff from Dec 2020 until Feb/Mar 2021.
Possible bottoms for that selloff:
- Bottom of the triangle price channel at around $2100.
- Finding support at the 200 EMA as it did when testing the previous EMAs. This would first LOOK like a breakout of the price channel in Apr/May 2021, but then bounce off of the 200 EMA in Jun 2021 at around $1800-$1900 before re-entering the channel.
If either of those bottoms hold, I would expect to retest the 100 EMA as resistance around $2400 by the end of 2021, and am bullish after that.
Support for this idea:
- Weekly chart shows the 20 EMA has bearishly crossed the 50 EMA, with the 50/100/200 EMAs relatively flat. This supports a slowdown over the next month as the longer EMAs start to turn down too.
- Daily chart shows a huge 5% drop today, with slightly bullish 20/50 EMAs and slightly bearish 100/200 EMAs. This supports short-term consolidation.
- This bullet is not technical analysis, but there's a Presidential election this year, and as long as Trump remains an underdog businesses will be "scared" of returning regulations in the coming year, therefore investors will assume a downturn IF Biden wins. I am NOT predicting a winner nor predicting any specific policies, but I feel there is a broad assumption that Trump would continue to gut regulations and cater to the market above all else, while Biden would not.
When do I throw this analysis in the trash?
- If we rebound from today's selloff and reach the top of the channel before August, there is probably enough buying pressure to break out and treat the channel as support instead. Unlikely, but 2020 has been full of surprises, so...
Trade active
Currently approaching the top edge of the broadening triangle pattern. Monthly chart:The daily MACD shows there may be a couple of red days next week, and I expect Wednesday's Fed announcement may be a contributing factor. But both daily and monthly charts show the overall upward trend is still holding.
We may continue up toward 3500, but I expect a more significant correction in late Sep to early Oct. I'm hoping it won't drop ALL the way down to the bottom of the triangle. There's decent support at 3200 and massive support at 3000.
That said, this is a crazy year so I will probably hedge a bit over the next couple of months.
Disclaimer
The information and publications are not meant to be, and do not constitute, financial, investment, trading, or other types of advice or recommendations supplied or endorsed by TradingView. Read more in the Terms of Use.