SPX - Fishing for the double bottom will turn out to be painful
About two weeks ago, we noted that the market was nearing 2022 lows, which led us to speculate about the short-term bounce. We reasoned that people would start predicting the double bottom formation and potential trend reversal. However, we stated that this bullish move-up would prove to be short-lived over time.
Since our post, SPX hit a new low and then bounced more than 6%. At the moment, the index trades near the 3 780 USD price tag, which coincides with the 20-day SMA. In our opinion, this retracement toward the SMA represents the correction of the downtrend, just like on previous occasions. If the price breaks above the SMA, then it can bolster the bullish case in the short term. However, a failure of the price to break above the level and hold there will suggest otherwise.
As for the medium and long term. We stay bearish and committed to our price target of 3500 USD. Our views are based on a combination of technical and fundamental factors described in this and previous articles.
Illustration 1.01
Illustration 1.01 displays the daily chart of SPX. The yellow arrow points to the price retracement toward the 20-day SMA. Two dashed white lines act as sloping resistance levels.
Technical analysis - daily time frame
RSI and Stochastic are bullish. MACD is neutral. DM+ and DM- are bearish. Overall, the daily time frame is bearish.
Illustration 1.02
Illustration 1.02 shows the daily chart of SPX and simple support/resistance levels.
Technical analysis - weekly time frame
RSI, MACD, Stochastic, DM+, and DM- are all bearish. Overall, the weekly time frame is bearish.
Please feel free to express your ideas and thoughts in the comment section.
DISCLAIMER: This analysis is not intended to encourage any buying or selling of any particular securities. Furthermore, it should not be a basis for taking any trade action by an individual investor. Therefore, your own due diligence is highly advised before entering a trade.
Since our post, SPX hit a new low and then bounced more than 6%. At the moment, the index trades near the 3 780 USD price tag, which coincides with the 20-day SMA. In our opinion, this retracement toward the SMA represents the correction of the downtrend, just like on previous occasions. If the price breaks above the SMA, then it can bolster the bullish case in the short term. However, a failure of the price to break above the level and hold there will suggest otherwise.
As for the medium and long term. We stay bearish and committed to our price target of 3500 USD. Our views are based on a combination of technical and fundamental factors described in this and previous articles.
Illustration 1.01
Technical analysis - daily time frame
RSI and Stochastic are bullish. MACD is neutral. DM+ and DM- are bearish. Overall, the daily time frame is bearish.
Illustration 1.02
Technical analysis - weekly time frame
RSI, MACD, Stochastic, DM+, and DM- are all bearish. Overall, the weekly time frame is bearish.
Please feel free to express your ideas and thoughts in the comment section.
DISCLAIMER: This analysis is not intended to encourage any buying or selling of any particular securities. Furthermore, it should not be a basis for taking any trade action by an individual investor. Therefore, your own due diligence is highly advised before entering a trade.
Trade active:
The price action after the employment data further confirms our bearish thesis. We stick to our price target of 3500 USD. However, we believe that the market will continue lower than that. Despite that, we will wait and update our thoughts as the trend unravels.
Trade closed: target reached:
Our price target of 3 500 USD was taken out.
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