SPX 500 Futures: Analyzing Price Movements and Predicting Trends
As a trader, keeping an eye on market trends and understanding how to interpret them is crucial to making informed decisions. In this article, I'll explore the price movements of the S&P 500 (SPX) futures since the beginning of February 2023. Whether you're a beginner or an intermediate trader, this analysis will provide insights into the market's behavior and hopefully help you make better decisions for your portfolio.
The Roller Coaster Ride: February to March 2023
At the beginning of February 2023, the ES futures hit a high near 4200, marking the start of a steep decline. The descent was impulsive, and prices dropped to almost 3800, stopping short by about 30 points. There are two ways to interpret the downward movement: either as a 5-wave structure or a 3-wave structure. The choppiness and overlap of the moves make it difficult to determine the exact structure, but one thing is clear: a significant bottom was reached around March 13, 2023, the same date as the bottom in 2020.
The Rebound and the Big Question
Since that bottom, the ES futures have rebounded, practically returning to their starting point at 4200. Now, we face a critical question: what happens next? From a trading standpoint, it appears that we're in a rising wedge, forming an ending diagonal with multiple 3-wave structures. If the lower trendline is breached, the market could be on its way to testing 4000, or even lower. However, if the upper trendline is broken and the market surpasses 4200, a slow grind up to 4300-4500 is possible, although I'd give it a 20% chance at this point.
Key Trendlines and Moving Averages
Beneath the current market level, two significant trendlines exist. The first, originating from the October lows, sits around 3925, while the second, from the COVID-19 lows, hovers around 3775. Interestingly, the latter trendline coincides with the 200-week simple moving average.
Making Bets: Bull or Bear?
Regardless of whether you're bullish or bearish, it's evident that the market is in a compressing wedge, which will eventually break in one direction or the other. The decision you need to make is whether to place your bets now or wait for a break to occur. It's worth noting that while the market has risen significantly, it could fall just as quickly. Conversely, after a challenging 2022 for investors, the market could continue to rise. The key to longer-term upside potential lies in the VIX, which needs to stay below 20 for the slow grind rise.
By examining the recent history of the SPX 500 futures and their current position within a compressing wedge, you can better prepare for potential shifts in the market. Whether you choose to place your bets now or wait for a break, staying informed and adaptable is crucial to successful trading.
The Roller Coaster Ride: February to March 2023
At the beginning of February 2023, the ES futures hit a high near 4200, marking the start of a steep decline. The descent was impulsive, and prices dropped to almost 3800, stopping short by about 30 points. There are two ways to interpret the downward movement: either as a 5-wave structure or a 3-wave structure. The choppiness and overlap of the moves make it difficult to determine the exact structure, but one thing is clear: a significant bottom was reached around March 13, 2023, the same date as the bottom in 2020.
The Rebound and the Big Question
Since that bottom, the ES futures have rebounded, practically returning to their starting point at 4200. Now, we face a critical question: what happens next? From a trading standpoint, it appears that we're in a rising wedge, forming an ending diagonal with multiple 3-wave structures. If the lower trendline is breached, the market could be on its way to testing 4000, or even lower. However, if the upper trendline is broken and the market surpasses 4200, a slow grind up to 4300-4500 is possible, although I'd give it a 20% chance at this point.
Key Trendlines and Moving Averages
Beneath the current market level, two significant trendlines exist. The first, originating from the October lows, sits around 3925, while the second, from the COVID-19 lows, hovers around 3775. Interestingly, the latter trendline coincides with the 200-week simple moving average.
Making Bets: Bull or Bear?
Regardless of whether you're bullish or bearish, it's evident that the market is in a compressing wedge, which will eventually break in one direction or the other. The decision you need to make is whether to place your bets now or wait for a break to occur. It's worth noting that while the market has risen significantly, it could fall just as quickly. Conversely, after a challenging 2022 for investors, the market could continue to rise. The key to longer-term upside potential lies in the VIX, which needs to stay below 20 for the slow grind rise.
By examining the recent history of the SPX 500 futures and their current position within a compressing wedge, you can better prepare for potential shifts in the market. Whether you choose to place your bets now or wait for a break, staying informed and adaptable is crucial to successful trading.
Trade active:
It may still be a little premature to call this a completed formation, but ultimately we have broken down. Continuing to monitor
