Evidence from the S&P 500 (SPX) – Slow Stochastic and RSI provide clues to when an important U.S. stock market peak could occur.
The daily SPX chart courtesy of BigCharts.com shows what’s happening.
On 12/01/23 the Slow Stochastic had a bullish lines cross strongly implying the SPX rally could continue. The bull cross happened when the Slow Stochastic was in the neutral zone. Examining three prior neutral zone bull crosses give us a rough estimate of how long the next SPX rally could continue.
The most recent example happened in October. Two trading days after the cross the upper Slow Stochastic line reached 80% – the overbought zone. Reaching overbought may not mean price has reached a top. In this case the SPX peaked seven trading days after the cross.
The August cross is interesting because it occurred almost at the same level as the 12/01/23 cross. Again, two trading days after the cross the upper Slow Stochastic line reached 80%. The SPX top was four trading days after the cross.
The July bull cross is another example of the upper line reaching 80% in two trading days. SPX topped twelve trading days after the cross.
On 12/01/23 RSI was at its highest level of the post 10/27/23 rally. The vast majority of the time stock indices make significant peaks with at least one bearish divergence. Therefore, it’s unlikely that the SPX made an important top on 12/01/23.
None of the bull cross examples signaled an SPX top when Slow Stochastic first reached 80%. Focusing on when the SPX peaked after the prior crosses gives us a time range of four to twelve trading days. The estimated time zone for what could be a significant SPX top is from 12/07/23 to 12/19/23.
The recent action of the Dow Jones Industrial Average may also provide evidence of a looming U.S. stock market top. The next blog will examine the current and long- term view of this index.
Four Dimension Trading 