S&P500 Crunch time, either holds or the Bear Market continues

The S&P500 index (SPX) has has two major rejections since December 13, as despite breaking (only intra-day) above the Lower Highs trend-line since January 04, it got rejected marginally above the 1W MA50 (red trend-line) and the next day on the 1D MA200 (orange trend-line). That is a double failure to break-out and considering that the 1W MA50 had the precious Lower High rejection on August 16, this is far from ideal for buyers.

On top of that, the RSI on the 1W time-frame got rejected on the Resistance Zone that formed the last two Lower Highs and is holding since March 28. As a result, with the price breaking today below the 1D MA50 (blue trend-line) for the first time in over a month (since November 10), we are ahead of critical crossroads.

Either it holds and keeps 1D candles closing inside the Channel Up (dotted lines) that started on the October 13 Low or it breaks below and repeats the patterns of the April/ May and August/ September sell-offs. As you see those sell sequences have very distinct structures. A break below the Channel Up should test the Support Zone below where we could see a temporary rebound back above the 1D MA50 towards the 1D MA200, in a Cup formation. A closing below the Support Zone, confirms going for the October Low.

In the case that the Channel Up holds and closes all candles inside it, a rebound is still limited to the January 04 Lower Highs trend-line. In order to resume buying, we need to see a candle closing above the 1W MA50, unlike December 13. In that case we can see the index test the 4330 (August 16 High) Resistance by March.

At this point, it is worth noting that the 1W RSI has also a clear Higher Lows trend-line that caught the previous market Lows and in fact is a Bullish Divergence. Keep an eye on that as a bounce on that Higher Lows trend-line can again give us the new Low and if it indicates indeed a long-term Bullish Divergence, this time it may be a Higher Low on the index as well.


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