SPX
SPY
ES1!
ES1!
Well, the S&P has made a crazy trip from Yearly S2 to Yearly R1 in what has certainly been a psychotic 2020 -- one that isn't over yet. On this weekly chart, I'd like to point out the firm rejection on R1 and then the follow through to the downside this week. While it wasn't crazy-strong follow through, it's certainly enough to make anyone paying attention take note. What's worse is that we have weakening RSI showing major divergence vs. the previous high, and also just a general divergence going back a few years before RSI reset this past March after hitting 30. What that means is that there just isn't the same momentum going into the last two highs as there was a few years ago. Breaking above 70 and then rejecting the 70 level is about as bearish as it gets. Taking a look at the Stochastic, the divergence is not as notable there as in RSI, so maybe that's somewhat of a silver lining. But, it does appear a bearish crossover will occur in the next week or two. I use the stochastic to confirm RSI, not the other way around as it tends to lag significantly, especially on longer time frames like weekly charts. Kinda looks like one of those setups where a few weeks later I think to myself "I should've taken the warning signs more seriously". If you take a look at the 4 hour chart, you'll notice a pretty sketchy hear & shoulders top with today's close right on the neckline. Joy <sarcasm>. Things could start getting sketchy as soon as next week.
So, if this is correct, and we're trending lower now, how low will we go? My guess is somewhere between S2 or S3 by the end of the year. That 1900 area is certainly strong support and should almost definitely be defended. After that, who knows? With everything as batshit crazy as it has been this year, there's no telling what next year will look like. My advice? Pack it in for the year or at least until the political cycle is behind us here in the US.
Good luck everybody.