Weekly Market Analysis: Insights and Trends
This week's market analysis reveals a continuing bullish trend, reminiscent of the dynamics observed in 2009 when the Plunge Protection Team was notably active. Given the possible influence of the election year, there's an increased likelihood that the House and Senate will be motivated to stabilize the market. Consequently, governmental vigilance is anticipated to prevent any significant market downturns. This environment has fostered a scenario where buyers hold more sway than sellers. The key takeaway for investors is to focus on price action and volume, and to "trade what you see."
Last week, the S&P 500 (SPX) turned positive for the year, now standing 14 points up. While the short-term trend for SPX is sideways, its long-term trajectory is upwards. The Nasdaq (NDX) and Russell 2000 Index (RUT) are still trailing, but are expected to catch up eventually.
In terms of leading indicators, copper prices deserve special attention. Currently, there's a divergence between the year-to-date (YTD) chart of copper and SPX, suggesting a potential reconciliation of prices. This divergence underlines the importance of closely monitoring price action.
The Volatility Index (VIX) is showing resistance around 15, with a current range between 11 and 15. This indicates substantial resistance at 15, pointing towards potential choppiness in the market unless significant news alters the trajectory.
Weekly Historical Price Analysis of SPX:
Analyzing the SPX using Fibonacci extensions and considering key historical price points, we observe a notable pattern. Taking the March 2020 low of 2191.86 and the high of January 3rd, 2022, at 4818.62, along with the October 2022 low of 3488.44, we find that the current SPX price aligns exactly with 50% of the 2020 low to 2022 high range. This alignment is a primary factor in the current market stagnation. If the SPX breaks above 4801.82 and maintains this level, the next weekly resistance could be at 5111.78, a target achievable within 60 days and aligning with the mean pricing on the daily chart.
Daily Price Action:
Currently, the SPX price is slightly below the mean pricing. The trend over a three-month period is upward, with a sideways movement observed in the 10-day chart. The 30-hour chart indicates an upward trend. For this week, the expected SPX price movement is towards an upside of 4842 and a downside of 4728, with a total possible movement of 128 points. The upside risk stands at 32 points, whereas the downside risk is 96 points, suggesting a higher probability of downside risk.
Overall Conclusion:
The SPX market analysis suggests a cautiously optimistic outlook. The market's bullish trend is supported by governmental measures and a buyer-dominated environment. However, the divergence in leading indicators like copper prices and the resistance in VIX imply the need for vigilance. Investors should prioritize real-time price action and volume analysis to navigate the potential volatility and opportunities in the coming weeks.