S&P 500: An Eye On The Larger Timeframes – Week Beginning twenty fifth March (SP500)

The S&P 500 (SPY) made one other decisive break greater this week. This follows a number of weeks of stalling and a shift in market behaviour (decrease weekly closes, weaker motion on Fridays) which didn’t ship a decisive breakdown. As last weekend’s article concluded, “The charts show indecision rather than a strong signal either way…the odds still slightly favour the bulls.” As we’ll see later on this article, the rally continues to carry the development channel.

This weekend’s replace will have a look at the upper timeframe view, new upside targets and strikes the bearish inflation factors additional up. Numerous methods can be utilized to a number of timeframes in a top-down course of which additionally considers the most important market drivers. The goal is to offer an actionable information with directional bias, necessary ranges, and expectations for future worth motion.

S&P 500 Month-to-month / Quarterly

Subsequent week would be the final week of Q1 and it is very important all the time maintain the upper timeframes in thoughts (I additionally monitor the yearly bars which occurred to finish an exhaustion sign in 2020). On March 3rd I commented on how bullish the quarterly bar was shaping up and speculated it “likely closes strong (which obviously would mean March also closes strong).” This seems to be to be taking part in out and finish of quarter window dressing will assist the bullish view.

The Q2 bar doubtless continues greater in early April, and whereas I nonetheless assume we might see a correction, I’ll go away any hypothesis out of my evaluation. Step one to a reversal can be to commerce again into the vary of Q1.

On the month-to-month chart, the March bar will doubtless kind a continuation bar for observe via in April. The rally has now flown previous the 5219 stage of the measured transfer the place the present rally from the October ’23 low was equal in measurement to the October ’22 – July ’23 rally. The following Fib extension of any significance is means up at 5421, however there should still be a response from the measured transfer which is extra necessary.

To date, there was little or no response at any of the earlier Fib targets which speaks of the power of the development. 5421 is the 261% extension of the July-October ’23 pullback, however is just not a key measurement and isn’t in confluence with anything. Different main targets are means greater which makes me assume we might nonetheless see a response within the 5200-300 space from the most important measured transfer talked about earlier.

The March vary can be necessary as soon as set at subsequent week’s shut. The February excessive of 5111 can be probably vital.

There can be a protracted anticipate the subsequent month-to-month Demark sign. March is bar 4 (of a potential 9) in a brand new upside exhaustion rely.

S&P 500 Weekly

After two weekly “doji” bars, the rally sprang again to life. As highlighted final week, a “doji” merely indicators indecision – it can result in a reversal however is actually not bearish by itself.

A continuation bar fashioned this week which suggests the S&P500 could make additional highs above 5261 subsequent week.

The 5261 excessive is the one actual resistance.

The hole at 5117-5131 is the primary help space, whereas 5048-5056 is a key inflection zone.

An upside Demark exhaustion sign is energetic. This precipitated a stall in current weeks, and should still trigger a reversal, however time is working out.

S&P 500 Day by day

Final week’s article highlighted a repeating sample which projected a powerful transfer to new highs. This performed out and appears to be persevering with with Thursday and Friday’s small every day bars (much like twenty third and twenty sixth February – see chart under). It suggests a sluggish consolidation will kind within the first half of subsequent week and result in an extra excessive adopted by a reversal again once more.

The every day channel is now effectively fashioned and can be intently watched which can result in some erratic motion on the subsequent check of help.

Thursday’s motion was mildly bearish and 5261 is resistance. The channel is rising round 10 factors every session and will additionally act as resistance. A measured transfer is available in at 5371 the place the rally beginning on the January low is the same as the October-December ’23 rally.

Hole fill at 5226 is preliminary help. The breakout space of 5179-89 is extra necessary and will line up with channel help and the 20dma which can be at 5151 on Monday and rising round 10 factors a day.

A every day Demark exhaustion sign can be on bar 5 (of 9) on Monday. A response is often seen on bars 8 or 9 so Thursday / Friday may even see a pause. Since this sign must compete with the tip of quarter window dressing, I would pencil a bigger response in for the primary week of April.

Drivers/Occasions

The FOMC assembly was perceived as dovish despite the fact that the 2025 dot plots projected solely three cuts as an alternative of 4. Markets are extra involved concerning the right here and now and Powell was requested if labor market power might get the Fed to carry off on cuts. He answered “not necessarily,” which was a aid for the doves and a inexperienced gentle for the rally.

Subsequent week’s calendar is far quieter. Thursday will deliver GDP knowledge and Unemployment Claims, Pending Dwelling Gross sales and Shopper Sentiment. The stronger the higher for shares. Friday’s most important occasion is the discharge of the Core PCE Worth Index which appears irrelevant in gentle of Fed feedback and the market response to CPI/PPI. That stated, reactions rely upon sentiment and positioning so it relies upon the place the S&P500 is buying and selling on Friday on the time of the discharge, e.g. whether it is on the lows of the week and a sizzling studying comes out, it might result in a giant transfer down.

Possible Strikes Subsequent Week(s)

Finish of month/quarter window dressing and final week’s break-out recommend the rally ought to proceed to new highs above 5261 with the every day channel more likely to act as rising resistance on the best way to 5300. Q1 and the month of March doubtless finish close to the highs which might venture observe via in Q2.

Preliminary help is at 5226 however 5179-89 is extra necessary. This marks the break-out space and a drop under might result in a interval of weak point with a break of the every day channel / 20dma fairly doubtless on what could be the fifth check. Bulls can wager towards this taking place subsequent week, and if the comparability highlighted on the every day chart performs out, a small dip ought to maintain 5179-89 within the first half of the week and result in new highs.

The every day channel will break down ultimately, and since it’s getting a bit apparent, I would speculate it breaks in early April. Ought to this occur, 5048-5056 can be key and an inflection for 4818.