The S&P500 index broke last week above its 1D MA200 (orange trend-line) for the first time since April 21 but so far has failed to touch the 1W MA50 (red trend-line), getting rejected once again on the Lower Highs Zone (red) since the All Time High (ATH) of January 04 2022. That is the (obvious) Resistance that everyone is paying attention too but nobody seems to be noticing the support pattern that may change S&P's fortunes around.
That is, as you see on the chart, the curved Support Zone (dashed) that is connecting all the Lower Lows since December 2021 and provided all counter-trend rallies so far. A rejection now on the ATH Resistance Zone, can pull the price back to the 1D MA50 (blue trend-line) and below towards this curved Support. A bounce there, confirms the pattern and would make the first Higher Low since December 03 2021! If it breaks though, we do expect the 3490 Low to be tested, even for S&P500 to move to a Lower Low and extend the Bear Cycle.
If the price reverses now though and neutralize Thursday's rejection by breaking above the ATH Lower Highs trend-line, we think that the 1W MA50 still won't be enough. Ideally we would like to see a break above the 0.786 Fibonacci retracement level (4150), in order to call for a confirmed bullish break-out. The reason is simple. In the previous two counter-trend rallies/ rebounds of this Bear Cycle, the rebound never broke about the 0.786 Fib, not on the March 29 Lower High and neither on the August 16 Lower High. A break now, would make us turn bullish targeting the 4330 Resistance 1 (August 16 High).
A main reason we give more probabilities to a bullish break-out now, even though we've honored this Lower Highs zone with our previous analyses in 2022, is that the RSI on the 1W time-frame is flashing a huge Bullish Divergence, being on Higher Lows since May 23 while in the same period the price action has been on Lower Lows.
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Excellent point. The downtrend line may be violated, but the 0.786 Fib retracement level may act as resistance.
nzahir
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@spy_master, In what way is the downtrend violated?
SpyMasterTrades
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@nzahir, I didn't say it is violated. Speaking hypothetically, I said that it may be violated but that the Fib retracement level may act as resistance. Basically, just restating the poster's point.
In other words what I mean is: The downtrend line can be violated, but the Fib retracement level may still act as resistance. Again, just restating the poster's point.
@nzahir, Agree with the earnings recession note. It's virtually a mathematical certainty because the money supply is rapidly shrinking and corporations can only ever earn a subset of the total supply of money.
Prosperitus
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Really nice chart! It seems to paint a clear picture.
Lingrid
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Agree with you
DaddySawbucks
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spot on imo. would give a right inverted shoulder in the expected position