Watch the S&P 500 – Trendline

This  current  blog was going to be a comparison of the stock bear market of 2007 to 2009 with the 2022 decline. The powerful move down of US stocks on 06/10/22 has  cause that comparison to be put on hold.

The 06/09/22 blog “Break of S&P 500 Support” noted that the rally after the 05/20/22 bottom only lasted eight trading days and that more rally  time could be needed before the next major bear move  begins.  The momentum readings for the S&P 500 (SPX)  on 06/10/22 imply that the major move down could  be  underway.

The daily SPX chart courtesy of Trading  View illustrates  the action.

Daily  MACD lines are on the verge of a bearish cross over and the Histogram is  on the verge of going below the zero line.

RSI has a bearish crossover of its  moving average and  the Stochastic slow line – in orange is  only at 49%.  

On 06/10/22 the SPX pushed below its  most likely support zone in the 3950 area  and appears it could break below the alternate support zone near 3880.  Major support is  the SPX 05/20/22 bottom at 3810.32.

A  fascinating  aspect of the SPX 2022 decline  is  that its  formed  a declining wedge which implies an Elliott wave – Ending  Diagonal Triangle (EDT) is  developing.  If  so, the SPX 2022 decline would be the “C” wave of an  Expanding Flat correction  that began at the 11/22/21 peak.  If this count is developing, it implies  that after completion the SPX could rally to a new all-time high.     

This  is a low probability wave count because of the size of the supposed EDT sub waves. Within EDT’s  the third wave is almost always shorter than the first wave.  The presumed third wave down of the EDT ended at the 05/20/22 bottom, which is  slightly larger than the presumed first wave that ended on 02/24/22.

A  break below the lower trendline could signal additional downside action. Declining  EDT’s  normally terminate with a brief overthrow of the lower trendline.  On this scale a  one-day overthrow is the most likely scenario.  If the SPX  travels  more than one – day below the lower trendline it could have very bearish  implications.

The bears are in control – important points to watch are –  support zone near 3880, the 05/20/22 bottom at 3810.32, and the declining  daily trendline.

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: