S&P 500: Will October’s Lows Be Retested?
It’s common to hear strategists predicting the S&P 500 will retest its October lows. Today’s charts consider the big index to ask whether its technicals support such a deep pullback.
First, the daily chart may have a basing pattern around 3,800. Also notice some potentially relevant candlesticks, starting with a hammer on December 22. The New Year began with an outside day (and false breakdown under 3,800), followed by an inside bar on Wednesday. That kind of price action may suggest prices are finding a floor.
Second, the Relative Strength Index has been turning higher and is now above its RSI-based moving average.
Taking a step back, remember that the index based at 3,600 as the fourth quarter began. Is it now basing 200 points higher as a new quarter begins? (Both times defying projections of a 3,200 floor.)
Next is the S&P 500’s weekly chart. The 3,800 level represents a 50 percent retracement of the rally between early October and late November. It’s also near a monthly low from last May.
In addition, the last three weekly candles have long tails, which may suggest buyers have defended lows.
Finally, breadth appears to be strong. (The Advance/Decline line has continued to push higher and is back near its recent peak.)
Of course, upcoming events like CPI on January 12 and corporate earnings are potential risks. But if the index holds its ground through those headlines, traders may find it’s already established a new and higher low.
TradeStation has, for decades, advanced the trading industry, providing access to stocks, options, futures and cryptocurrencies. See our Overview for more.
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TradeStation Securities, Inc., TradeStation Crypto, Inc., and TradeStation Technologies, Inc. are each wholly owned subsidiaries of TradeStation Group, Inc., all operating, and providing products and services, under the TradeStation brand and trademark. TradeStation Crypto, Inc. offers to self-directed investors and traders cryptocurrency brokerage services. It is neither licensed with the SEC or the CFTC nor is it a Member of NFA. When applying for, or purchasing, accounts, subscriptions, products, and services, it is important that you know which company you will be dealing with. Please click here for further important information explaining what this means.
This content is for informational and educational purposes only. This is not a recommendation regarding any investment or investment strategy. Any opinions expressed herein are those of the author and do not represent the views or opinions of TradeStation or any of its affiliates.
Investing involves risks. Past performance, whether actual or indicated by historical tests of strategies, is no guarantee of future performance or success. There is a possibility that you may sustain a loss equal to or greater than your entire investment regardless of which asset class you trade (equities, options, futures, or digital assets); therefore, you should not invest or risk money that you cannot afford to lose. Before trading any asset class, first read the relevant risk disclosure statements on the Important Documents page, found here: https://www.tradestation.com/important-information.
First, the daily chart may have a basing pattern around 3,800. Also notice some potentially relevant candlesticks, starting with a hammer on December 22. The New Year began with an outside day (and false breakdown under 3,800), followed by an inside bar on Wednesday. That kind of price action may suggest prices are finding a floor.
Second, the Relative Strength Index has been turning higher and is now above its RSI-based moving average.
Taking a step back, remember that the index based at 3,600 as the fourth quarter began. Is it now basing 200 points higher as a new quarter begins? (Both times defying projections of a 3,200 floor.)
Next is the S&P 500’s weekly chart. The 3,800 level represents a 50 percent retracement of the rally between early October and late November. It’s also near a monthly low from last May.
In addition, the last three weekly candles have long tails, which may suggest buyers have defended lows.
Finally, breadth appears to be strong. (The Advance/Decline line has continued to push higher and is back near its recent peak.)
Of course, upcoming events like CPI on January 12 and corporate earnings are potential risks. But if the index holds its ground through those headlines, traders may find it’s already established a new and higher low.
TradeStation has, for decades, advanced the trading industry, providing access to stocks, options, futures and cryptocurrencies. See our Overview for more.
Important Information
TradeStation Securities, Inc., TradeStation Crypto, Inc., and TradeStation Technologies, Inc. are each wholly owned subsidiaries of TradeStation Group, Inc., all operating, and providing products and services, under the TradeStation brand and trademark. TradeStation Crypto, Inc. offers to self-directed investors and traders cryptocurrency brokerage services. It is neither licensed with the SEC or the CFTC nor is it a Member of NFA. When applying for, or purchasing, accounts, subscriptions, products, and services, it is important that you know which company you will be dealing with. Please click here for further important information explaining what this means.
This content is for informational and educational purposes only. This is not a recommendation regarding any investment or investment strategy. Any opinions expressed herein are those of the author and do not represent the views or opinions of TradeStation or any of its affiliates.
Investing involves risks. Past performance, whether actual or indicated by historical tests of strategies, is no guarantee of future performance or success. There is a possibility that you may sustain a loss equal to or greater than your entire investment regardless of which asset class you trade (equities, options, futures, or digital assets); therefore, you should not invest or risk money that you cannot afford to lose. Before trading any asset class, first read the relevant risk disclosure statements on the Important Documents page, found here: https://www.tradestation.com/important-information.
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