Weekly Update: Tracking a Top in the SP500 Futures
In mid-June the SPX Futures hit a high of 4493.75. Let’s examine the data points, the characteristics of the subsequent price action, and attempt to see if the SPX Futures Market topped at 4493.75.
Since futures bottomed in October of 2022 at 3502, price advanced for 8 months so far has appreciated by 28.3%. With market analysts, money and asset managers, and financial news reporters all weighing in on whether we’re in a new bull market or not, let’s see if there is more of a quantitative method to gain insight into the answer to that question. I will state unequivocally, that until price breaches 3502, there is nothing confirming that the market did NOT bottom in October. Comparatively, until price breaches 4808.25, the all-time highs of 2022, we’re not confirmed the longer term trend is bullish. Objectively, the truth is price is digesting previous gains off the Covid-19 lows of 2020. That is all we can say definitely. However, much like an investigator trying to solve a crime, there are clues that can point us in the direction of a reasonable conclusion. To the degree those probabilities favor one direction or the other, from there we can begin to devise a trading strategy.
Counter-Trend Price Action
Having topped at 4808.25 in January of 2022 price declined approximately 27% in 10 Months and bounced in from 3502. Since then, our recent high of 4493.75 came into the area of between the .618% and the .786% retracement level. Actually, closer to the .786% having exceeded the .618%. This length of price retracement more than fulfills a standard retracement for counter price action. However, this data point alone, does not confirm the counter trend rally has concluded and the previous trend down will resume. Additionally, the entire pattern off the October lows resembles the kind of corrective price action we would expect as it is very overlapping in nature. Only towards the end of the pattern did price become impulsive, and that is easily attributed to a c-wave. The counter trend price action by itself is not conclusive evidence that a top has been struck. However, it supports that case more so, than invalidates it.
MACD divergences
The interesting thing about the move off the October lows is MACD is the entire advance occurred on negative divergence. I’ve written about this before and this also supports the price action as corrective. This was not a strong rally in terms of what normally is associated with Bull Market advances.
In summary and based on the price action as of today, I would have to say that odds favor the SPX Futures topped mid-June. Although we have no definitive proof, like an impulsive pattern to track to the downside, that may soon enough reveal itself. Based on the odds favoring a top to the price action off the October bottom resembling a corrective retracement of a downside trend, I would expect for price to ultimately breach the October lows of 3502 and head closer towards the 3,000 level sometime in the first half of 2024.
Since futures bottomed in October of 2022 at 3502, price advanced for 8 months so far has appreciated by 28.3%. With market analysts, money and asset managers, and financial news reporters all weighing in on whether we’re in a new bull market or not, let’s see if there is more of a quantitative method to gain insight into the answer to that question. I will state unequivocally, that until price breaches 3502, there is nothing confirming that the market did NOT bottom in October. Comparatively, until price breaches 4808.25, the all-time highs of 2022, we’re not confirmed the longer term trend is bullish. Objectively, the truth is price is digesting previous gains off the Covid-19 lows of 2020. That is all we can say definitely. However, much like an investigator trying to solve a crime, there are clues that can point us in the direction of a reasonable conclusion. To the degree those probabilities favor one direction or the other, from there we can begin to devise a trading strategy.
Counter-Trend Price Action
Having topped at 4808.25 in January of 2022 price declined approximately 27% in 10 Months and bounced in from 3502. Since then, our recent high of 4493.75 came into the area of between the .618% and the .786% retracement level. Actually, closer to the .786% having exceeded the .618%. This length of price retracement more than fulfills a standard retracement for counter price action. However, this data point alone, does not confirm the counter trend rally has concluded and the previous trend down will resume. Additionally, the entire pattern off the October lows resembles the kind of corrective price action we would expect as it is very overlapping in nature. Only towards the end of the pattern did price become impulsive, and that is easily attributed to a c-wave. The counter trend price action by itself is not conclusive evidence that a top has been struck. However, it supports that case more so, than invalidates it.
MACD divergences
The interesting thing about the move off the October lows is MACD is the entire advance occurred on negative divergence. I’ve written about this before and this also supports the price action as corrective. This was not a strong rally in terms of what normally is associated with Bull Market advances.
In summary and based on the price action as of today, I would have to say that odds favor the SPX Futures topped mid-June. Although we have no definitive proof, like an impulsive pattern to track to the downside, that may soon enough reveal itself. Based on the odds favoring a top to the price action off the October bottom resembling a corrective retracement of a downside trend, I would expect for price to ultimately breach the October lows of 3502 and head closer towards the 3,000 level sometime in the first half of 2024.
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