SPX is expected to pull back in the coming August and September.
- Seasonal Patterns: The chart shows that historically, August and September tend to have negative performance for the S&P 500 (SPX). August has an average return of -0.05%, while September shows an average of -1.83%.
- Current Trend: The recent price action shows a significant downturn, which could continue into these traditionally weak months.
- Volatility: The large red candle on the most recent bar suggests increased volatility, which often precedes further pullbacks.
- Volume: The high volume accompanying the recent drop (7.191B) indicates strong selling pressure, which might persist.
- Technical Setup: The double top formation visible on the chart often precedes extended downward moves.
Trading Recommendations:
- Short-term Short: Given the clear downtrend and technical patterns, further decline is possible. Consider establishing short positions for the short term.
- Set Stop-Loss: If going short, suggest placing stop-loss just above previous highs, around 5,600-5,650 points.
- Target: First target could be set near 5,200 points, a potential support level.
- Watch for Rebounds: If a strong rebound occurs, especially with high volume, it might present a long opportunity.
- Risk Management: Given high market volatility, use smaller position sizes and adhere strictly to stop-losses.
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