The S&P500 ($SPX) rose a little more than 6%, but remains ~4% below the 50-day and ~13% below the 200-day. Friday's strong move put the SPX into the middle of a resistance zone created by the May lows.
2022-06-26-SPX Trendline Analysis - Daily
The ADX stays in bearish territory for now. Another strong up day this week likely flips the signal to bullish.
Price/volume moves to mixed, with a follow-through on Day 4 of the latest rally attempt (Day's 4 through 10 is the window for confirmation).
Unfortunately, there are issues. Ideally, a rally begins with the index above the 50-day moving average. The index remains below that level, which creates overhead resistance for any fledgling uptrend.
More concerning than the price level is the trading volume. Both the rally start and the follow-though came on higher than average trading volume, but not because traders were bullish or fundamentals supported those moves. Instead, trading volumes were elevated by market "events"; quarterly options and futures expiration (quadruple witching day) and index rebalancing, respectively.
2022-06-26- SPX Elliott Wave Analysis - Daily - Primary Y
Elliott Wave also shifts to mixed, thanks to the MACD divergence finally showing up. It's very small, but it's there, so another bear market rally is in play. The SPX retraced ~50% of the June early to mid June drop, which is the minimum retracement for a 2nd wave. The maximum is 100%, or the June high near 4200. Passing that level invalidates the current count, but not the bear market downtrend.
Summer started last week, and with it a relatively quiet time for the market, in terms of data. Earnings season starts in 3 weeks, and trading volume around the 4th of July holiday in the U.S. is traditionally low. Maybe buyers will be able to bid up the price and we see a face-ripping, bear market rally? Maybe not.
As Mark Douglas states in his book "Trading in the Zone", the first fundamental truth of trading is "Anything can happen".
Best To Your Week!
Charts provided courtesy of stockcharts.com.
Once a year, I review the market outlook signals as if they were a mechanical trading system, while pointing out issues and making adjustments. The goal is to give you to give you an example of how to analyze and continuously improve your own systems.
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