S&P500 shows weakness

SP:SPX   S&P 500 Index
Trade idea: Short
Target: 4080

The price dropped and met its support on the 50-day moving average.
There are several factors, why we suppose that it is the beginning of the US stock market correction.

  • S&P500 fell out of the rising wedge it has been forming since October 2020 for the first time.
  • SPX couldn't reach the upper border of the wedge since May 10, 2021.
  • Every RSI deep during this uptrend was higher than the previous one, but right now the RSI dropped lower than it did on August 19.

These facts tell us that the upcoming correction on the stock market might be close. If by the end of this week (13.09-17.09) SPX does not return into the channel and closes a daily candle outside it, we will see a drop to 4375 and 4240, 4080 levels. The 4080 level is the main target for this correction movement.

On the other hand, September 30 is the end of the US financial year and the US government is interested in holding the market on its highs until the end of September. That's why we might see SPX trading in range during the next couple of weeks. In this case, if the price returns to the rising wedge, traders need to look carefully at the 4550 resistance level. If price breaks through this resistance a long trade might be opened. Otherwise, we will get another short trade option with the same targets we've mentioned before.

S&P500 demonstrated its weakness, we suppose that from now short trades will be the safest option.


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