S&P 500: Getting Loopy – Week Beginning twelfth February (Technical Evaluation) (SP500)

The S&P 500 (SPY) reached the 5000 milestone this week. I really thought it’d fall simply brief and in last weekend’s article speculated sentiment was getting “too bullish” simply as seasonality shifted damaging. Clearly, this wasn’t the case and the bullish technicals trumped my hypothesis.

I nonetheless assume we might get a correction in February, however maybe I’m overthinking issues. There have been 14 increased weekly closes out of the final 15 which hasn’t occurred for 52 years. In case you add the actual fact the S&P 500 has gained 20% in these 15 weeks, it’s the first time this has ever occurred. That is an uncommon setting and no-one can say how “crazy” issues will get.

This week I’ll as soon as once more determine key spots the place the S&P 500 ought to maintain on dips if the uptrend is to stay robust or roll over right into a reversal. Moderately than speculate on tops we are able to shift impartial/bearish when there may be actual technical proof to take action. Varied strategies might be utilized to a number of timeframes in a top-down course of which additionally considers the most important market drivers. The intention is to supply an actionable information with directional bias, essential ranges, and expectations for future value motion.

S&P 500 Month-to-month

The February bar has moved far sufficient for a return beneath the January 4931 excessive to be thought of a purple flag. Dropping beneath 4853-61 would sign a correct bearish shift.

As talked about final week, seasonality in February shifts weaker and the S&P 500 has closed increased solely 50% of the time when it positive factors greater than 10% in November and December and likewise closes increased in January. Moreover, the second half of February is the one of many weakest two-week intervals of the yr.

Now that the S&P 500 is in “blue sky” at new all-time highs, Fibonacci extensions and measured strikes act as a information for targets. After practically fifteen years of drawing Fibs, I’ve discovered some work significantly better than others. The 1.13% extension at 4991, for instance, will not be one thing I put a lot religion in. Nonetheless, the 200% extension of the July-October correction in confluence with the 90% measured transfer (90% is a measurement I exploit loads in Elliott Wave) may very well be extra vital. This is available in at 5107-5110.

As talked about earlier, 4853-61 is a crucial degree on the draw back. 4818 is the subsequent main degree on the earlier all-time excessive.

There might be an extended anticipate the subsequent month-to-month Demark sign. February is bar 3 (of a doable 9) in a brand new upside exhaustion rely.

S&P 500 Weekly

For the fifth week in a row, a powerful weekly bar shaped with a better low, increased excessive and better shut. Observe by is once more seemingly within the first half of subsequent week.

The rally has now reached the highest of the channel at 5025. There might be a response in some unspecified time in the future subsequent week and we are able to watch intently for a change in character. As soon as extra, a key change can be new lows of the week on Thursday and Friday as an alternative of the brand new highs we maintain seeing just lately.

Channel resistance is round 5025. The identical Fib targets from the month-to-month chart apply so 5107-5110 is the subsequent goal.

There is no main weekly help shut by, with the small weekly hole from 4842-44 the primary essential space.

An upside Demark exhaustion rely might be on bar 6 (of 9) subsequent week so no exhaustion sign will register. A response is often seen on weeks 8 or 9.

S&P 500 Day by day

Friday’s robust session broke the 5000 degree convincingly and closed proper on the highs. This transfer ought to proceed, at the least within the early a part of subsequent week, and 5000 is now near-term help.

The rally has reached the highest of the day by day channel from the January low in addition to the big weekly channel. Up to now, each time it has touched the channel excessive it has pulled again barely or paused. Breaking a earlier day’s can be a change price noting.

Other than the twin channels at 5025, there is no such thing as a resistance.

5000 is the primary help, however not related to the well being of the development. 4975 is extra essential and a break by this degree would take among the most bullish choices off the desk (however would but not verify a prime is in). Channel help is round 4930 on Monday and rising 10 factors per session.

An upside Demark exhaustion rely might be on bar 8 (of a doable 9) on Monday which suggests we may even see a response on Monday or Tuesday.

Drivers/Occasions

This week was significantly quiet. Fed audio system mentioned nothing new, knowledge was in-line and bond auctions have been unremarkable. CPI revisions on Friday balanced out with no vital modifications.

Subsequent week ought to deliver extra motion as CPI is launched on Tuesday. The large query is whether or not the tick up in financial knowledge over latest months might be mirrored in inflation readings. The subsequent huge query is whether or not it actually issues to the S&P 500. In any case, the latest development of upper yields and decreasing odds of Fed easing have not dented the rally in any respect. I do assume this stuff nonetheless matter, nevertheless it may want some sort of jolt to get the market to pay attention.

Retail Gross sales, Empire State Manufacturing and Unemployment Claims might be launched on Thursday.

PPI and Client Sentiment are launched on Friday.

Possible Strikes Subsequent Week(s)

The S&P 500 blew by 5000 and closed the week strongly. Friday’s motion supplies good odds for an extra excessive above 5030 early subsequent week.

That mentioned, the rally has run into some resistance on the prime of the weekly and the day by day channels. With a day by day exhaustion sign on account of come into impact on Monday or Tuesday, there are causes to consider a brand new excessive above 5030 fails.

How any failure performs out might be essential for the remainder of the week and doubtlessly your complete development. Current dips and corrections have been minimal. Usually all we see is a day by day “inside bar” earlier than continuation increased. In probably the most bullish eventualities, the 5000 degree ought to maintain.

Bears might get some traction with a break by 5000, and extra importantly 4975. Most essential of all, search for new weekly lows on Thursday and Friday and a detailed on the low of the weekly vary. This may be a change in character and supply some a lot wanted proof to help speculative prime calls.