SPX at a decisive point

We recently pointed out how the Chinese stock market started to stagnate despite the regulator's intervention. Additionally, we noted that this was likely to happen in the U.S. market as well. Fast forward to today, and that is indeed the case. Since the beginning of the current month, SPX failed to reach a new high. Therefore, we are paying close attention to multiple technical indicators on the daily chart, which suggests that SPX might be at a decisive turning point. Over the past few days, Stochastic and RSI flattened (on the daily chart). To bolster a bearish case, we want to see them start declining. Furthermore, we want to see MACD drop below the midpoint, which would also strengthen the bearish case. In such a scenario, we expect SPX to drift below $4,400. Contrarily, to support a bullish case, we want to see all these indicators trend to the upside, with MACD holding above the midpoint.

Illustration 1.01

Illustration 1.01 displays the daily chart of MACD, which is flattening just slightly above the midpoint. Breakout below zero will be bearish.

Illustration 1.02

Illustration 1.02 shows the daily chart of VIX. The yellow arrow indicates an opening gap on 5th September 2023 that has not been filled yet.

Technical analysis gauge
Daily time frame = Neutral
Weekly time frame = Neutral
*The gauge does not necessarily indicate where the market will head. Instead, it reflects the constellation of RSI, MACD, Stochastic, DM+-, ADX, and moving averages.

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.

Comment:

Yesterday, we saw hotter-than-expected inflation and CPI prints, initially dragging the market down. However, to our surprise, the market closed in the green for the day. Considering that we are about a week away from the FOMC meeting with the monetary decision, it is likely that the stock market will stay relatively flat until then, just like it is common before such meetings. Today, we will pay attention to jobless claims, retail sales, and inventories.

Comment:

SPX dropped below $4,400 during the time of our absence. We will update our thoughts on the asset early next week.

Comment:

One more thing to note: market conditions are increasingly favoring the market crash. On top of that, most of the people forecasting FED rate cuts already last year are still expecting a soft landing, dismissing any issues on the horizon. In some instances, the current period and narratives are very similar to what they were shortly before the 2008 crash. In our opinion, most people are unprepared for what is coming, and we would like to raise a word of caution to market participants. While a crash is not warranted, it definitely should not be underestimated.