Dr. Arnout ter Schure | Apr 07, 2021 02:38PM ET
The S&P 500 reached the 4000 level this week. So what is next? I usually use the Elliott Wave Principle (EWP) to assess what is most likely next for an index or individual stock. This time, however, I would like to use "simple" technical analyses. Figure 1 below shows the daily chart for the SPX.
Figure 1. S&P500 daily chart:
By moving from the top to the bottom of Figure 1, I observe objectively and factually that:
Thus, the index's overall scorecard is, assigning equal weight to each line item, 85% bullish.
But what would it take for the index to become bearish?
First, daily closes below the simple moving averages are needed, especially below the 50d SMA, as that would also coincide with a daily close below the lower black and purple trendlines. By then, the index is losing support, and the rising wedge pattern is complete. But one does not necessarily have to wait that long to protect long profits as a daily close below each SMA is a further warning for the bulls. Ultimately a close below the March 25th low at SPX 3854 is needed to make a lower low and confirm a more significant correction of around 20+/-5%, is materializing.
Bottom line: By objectively analyzing the SPX's price chart, one can make reliable assessments of the market's current state and what it would take to turn it from the current bullish setup into a bearish mode. No need for guessing or opinions.
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