The Standard and Poor's Index (S&P500 / SPX) has been on a strong correction these past roughly 6 months. For that reason, we present this analysis on the 6M time-frame, where every candle represents 6 months of price action.
** The RSI indicating where we are ** It is not a surprise that the current one is in deep red as its whole price action has been the aforementioned correction phase. The 6M RSI (pane below the chart) offers a valuable insight on where SPX may stand on the long-term as compared to the past mega-Cycles, which keep repeating throughout the history.
** Periods of recession ** As you see, the RSI broke below its MA trend-line (yellow line) for the first time since the first six months of 2012. Practically this was when the market confirmed the recovery from almost a decade long period of extreme uncertainty and volatility that was fueled by the two major crashes, the DotCom and the Subprime mortgage crisis. Historically, the last similar period was the roughly 10 years that followed the early 30s Great Depression.
** Same as in mid 50s ** Back to the RSI. The last time the indicator broke below its MA line, being that high (around 85.00) following the recovery from a Recession, was in the second half of 1957. Both are marked with a circle. The market posted only one red 6M candle and then steadily recovered. In fact as long as the 6M MA20 (green trend-line) was supporting, the index was making Higher Highs. Once it broke, it made a Lower Low and then after a Higher High, it broke even lower to touch the 6H MA50 (blue trend-line). That held and kickstarted a period of highly aggressive stock growth until the DotCom crash.
** The MA20 and MA50 being the multi-decade Support Zone ** Note that during both RSI breaks below the MA, the index has been way above the 6M MA20. In fact, the last time the index (almost) touched the 6M MA20 was during the March 2020 COVID crash. Notice how basically the MA20 and MA50 form the multi-decade Support (Buy) Zone since practically 1943.
** Conclusion ** This historic pattern suggests that if the current price action is modelled out of it, then the current correction shouldn't go past June and as long as the 6M MA20 holds, the S&P500 index is up for a sustainable decade of Higher Highs and Higher Lows where dips near the 6M MA20 will present buy opportunities.
Do you agree with the above hypothesis or you think a new recession is ahead of us? Let me know in the comments section below.
One of the reasons the index is consistently going up is because of inflation. If you take out inflation and the Federal Reserve reckless monetary policies (1913) the index would probably still be under 10 because we would have a stable currency. When we went off the gold standard in '71, the index went from 98 to almost 4000 today. That is not because the companies are 400x more profitable than in 1971. We are witnessing the demise of the currency. Our economy is driven by debt, and that is reflected in the rise of the stock market. If you like high flying stock charts, look at Zimbabwe or Venezuela. That's where we're headed.
Dr_Roboto
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As a point of reference. I think that most technical analysis that I have seen indicates a strong possibility of a correction to the 3200 level in the next 6-12 months, which looking at your chart would have it touching the 6M MA20 and the 0.786 line.
UnknownUnicorn15614419
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Very good job!
DeGRAM
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Thank you for your analysis. Great job!
mooncrest-holdings-ltd
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looks like someone doing elhers loop
DaddySawbucks
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gosh looks like jan-jun 08; the next six months will be an unpleasant surprise imo