S&P 500 Technical Analysis

The 4-hour view of the S&P 500 shows a bullish equidistant channel starting from roughly May 20. It may be possible that the price hits the resistance levels of 1413 and 1424, but a reversal to the lower end of the channel is also possible. A bullish sentiment is likelier as one can notice that the bullish rallies are oscillating higher and higher while the bearish ones are getting smaller.

In the S&P500 daily chart, we can notice the bullish sentiment by the technical indicators. Stochastics have crossed the 80 line and are going higher after giving a bullish buy signal. MACD has been bullish since early June and continues to go higher. Its sell signals are usually weak and false while the buy signals are proving to be correct. The Relative Strength Index has been going higher and has yet to cross the 70 mark. Look out for an overbought signal in a few days if the rally continues.

If the price channels are taken into consideration, the price has largely been following a trend as it has tuck to the upper price channel since the start of August, coming down to its mid-point a few times, and going back up. It has not touched the lower price channel once since the start of July.

The weekly chart confirms the rally; the index has been rising from May and continues to do so. If the index reaches the upper price channel at 1422, a reversal to the mid-point (1344) or lower end (1266) of the price channel may be seen. MACD recently gave a buy signal and is expected to be bullish for a few weeks. Stochastic has been bullish but is crossing the overbought mark at 80; contrarian traders should look out for a bearish signal in the coming weeks. RSI has been following the price trend and may give an overbought signal in the coming week if the trend is to continue.

Fundamental: Market sentiment has become worrisome as the rally continues as strategists suggest that the rally is unlikely to last and investors should remain cautious. A negative close by the end of the week may be likely, which corresponds with a bearish reversal towards to the lower end of the channel as seen in the technical analysis chart.

The job report on Friday, which caused the rally, is thought to be misplaced as a large number of jobs are only temporary. The hiring boost that occurred may be largely due to seasonal employment. GDP growth has been 1.5% in the second quarter, which is considered largely anemic.