Navigating the Weekly Market Landscape: A Comprehensive Analysis of SPX
Long and Short-Term Trends: UP, but Caution Lingers
As we delve into the weekly market forecast for the S&P 500 Index (SPX), it's evident that both the long and short-term trends are currently on an upward trajectory. Despite the absence of clear price evidence indicating an imminent pullback or reversal, last week witnessed a sudden mid-week dip, swiftly followed by a recovery, culminating in an above-average performance for the week. Amidst heightened market breadth and a rise in the VIX from 12.53 to 13.06, investors are cautiously preparing for potential pullbacks, as indicated by the CPCE index standing at 1.14, signaling a preference for puts over calls.
Examining the Price Patterns and Actions
In the realm of SPX, a long-term reverse head and shoulder price pattern has been gradually forming since the latter part of 2022. This pattern came to fruition in April 2023 when the price broke through the neck. This multi-year price action, with an anticipated price projection of 4824 (the January 2022 high), now finds SPX hovering around the 4754 range. Investors are optimistic about the possibility of the price reaching this level by the end of the year.
On a shorter horizon, another ABC price pattern has emerged, initiated around March 2023, with the price currently in the final stages of the C leg formation. The projected price from this pattern is 4891 by March 2024. However, before this formation, there is a higher probability of a price pullback toward 4596 or even 4539, offering opportunities for bullish investors.
Support and Resistance Dynamics
With the current SPX price at 4754, immediate resistance is at 4824, followed by 4891. Meanwhile, the closest support levels are at 4640, 4596, and 4539. In the event of a pullback, proactive investors are expected to act swiftly to secure profits.
Conclusion: Trade What You See, Hope Is Not a Strategy
In conclusion, the prevailing sentiment emphasizes the importance of trading what is visible, with hope deemed insufficient as a strategy. The price action is unequivocally bullish, supported by a positive trajectory and warming market breadth. However, a note of caution is sounded, urging investors to prepare an action plan for potential calamities. The overarching advice is to remain vigilant, even in a bullish market, and to be prepared for survival by aligning strategies with the ever-dynamic market conditions.