Break of Important Support

Today 01/20/22 the S&P 500 (SPX) broke below the bottom made on 12/03/21, eliminating  the presumed Elliott wave – Horizontal Triangle that’s been examined in recent blogs.

Something else significant happened which is  illustrated  in the daily SPX chart courtesy of Trading View.

The basic definition of a bull market is a series of higher highs and higher lows.  Since the beginning of the bull phase that began in March 2020 almost every multi-day correction has been higher than the previous correction.

The one exception was the minor decline that terminated on 08/19/21. This  bottom was subsequently breached during the correction that ended on 10/04/21.

Today’s break of the 12/03/21 bottom is also a lower low and increases the chances that a significant top may have been made on 01/04/22.

If an important top is in place it implies at least a multi-month bear phase.  In the short-term more price action is needed before entering  bearish  positions.  Additionally, we need to see how US stocks react to the FOMC decision on interest rates at their 1/26/22 meeting.  FOMC  decisions can frequently trigger large moves in either direction and you don’t want to get caught on the wrong side of the reaction.

Be patient, if a multi-month decline is underway there will probably be several short entry points.  Currently evidence is leaning to the bear side, we need  more bearish  evidence before entering a  short side trade.     

Published by Mark Rivest

Independent investment advisor, trader, and writer. Articles have appeared on Technical Analysis of Stocks and Commodities , Traders.com Advantage, Futuresmag.com, and Finance Magnates.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s

%d bloggers like this: