AN EVENTUAL RETEST OF FIRST HALF LOWS STILL LOOKS LIKELY -- IN ORDER TO PREVENT THAT, OCTOBER LOWS HAVE TO HOLD -- FOR THAT TO HAPPEN, SOME SHORT-TERM CHART BARRIERS NEED TO BE OVERCOME --
S&P 500 IS RETESTING ITS OCTOBER LOW ... Since the nearly nearly three year uptrend that started in stocks in early 2016 appears to have peaked, an eventual retest of early 2018 lows appears likely. That would mean an eventual retest of February/April lows on the S&P 500 ranging from 2532 to 2553 on an intra-day basis as shown in Chart 1. Heading into the Thanksgiving holiday, however, the SPX is trying to find support above its late October low. That would be a logical chart spot for some bottom-picking to emerge. But the S&P 500 needs to clear some overhead resistance barriers for that test to be successful.
(click to view a live version of this chart)
Chart 1
S&P 500 REMAINS BELOW MOVING AVERAGE LINES ... The daily bars in Chart 2 show the S&P 500 trying to find support above its late October intra-day low at 2603. Working against the SPX is the fact that it's still trading well below both its 50- and 200-day moving averages. The SPX would need to clear both of those lines to strengthen its short-term trend and increase the odds for a successful retest of support. But first there are a couple of other shorter-term overhead resistance barriers that need to be overcome. Hourly price bars give a closer look at a couple of them.
(click to view a live version of this chart)
Chart 2
HOURLY BARS SHOW SHORT-TERM RESISTANCE BARRIERS... The hourly price bars in Chart 3 give a closer look at a couple of short-term resistance barriers the SPX needs to overcome. The first barrier is the small overhead gap formed at Monday's intra-day low of 2681. It would then have to rise above its resistance peak at 2746. It would then have to clear its early November peak at 2815 to signal a short-term bottom. While a short-term rebound is certainly possible, stocks are working against some negative long-term trends. Weekly MACD lines remain on long-term sell signals. While monthly MACD lines are one week away from registering their first major sell signal in more than two years. In other words, any short-term rally attempt from here would be facing strong headwinds from longer-range trends which are weakening. That suggests that the best strategy for investors between now and yearend may be to sell into any seasonal rallies. But today's rebound may contribute to a happier Thanksgiving day for a lot of nervous investors. That would be something to be thankful for. On that positive note, I'd like to wish everyone a very Happy Thanksgiving.
