What a week it has been in the stock market! Despite the ups and downs, the S&P 500 managed to close at 5344, just slightly lower than the previous Friday. The big question on everyone’s mind now is whether the bottom is in? In this week’s analysis, we will delve into the technical indicators from last week’s market action to determine if a bottom has been reached or if there is more downside to come.
Looking at the monthly chart of the S&P 500, we can see that there is still some ways to go before the August close. A close above the July low of 5390 is crucial to shift the current neutral/bullish sentiment. The recent low of 5119 did not align with any major monthly reference levels, and historically, major bottoms tend to form near higher timeframe levels. So, the jury is still out on whether the bottom is truly in.
Moving down to the weekly chart, we can see that Monday’s open gapped below the important level of 5265 and reached a low of 5119. The market found support around this level, possibly due to a small weekly gap at 5127 from a previous week. While the bounce off the lows was strong, forming a bullish candle, there is still a concern with a lower low, lower high, and lower close being established. The upcoming week will be crucial in determining if a reversal is confirmed with higher highs and higher lows.
Looking at the daily chart, the S&P 500 remains below the 20-day and 50-day moving averages, signaling a bearish sentiment. However, the index is approaching the 200-day moving average, which could act as a magnet for prices. The recent low at 5119 was near a measured move level of 5115, indicating a potential bullish scenario with a 3-leg correction pattern forming.
In terms of upcoming events and drivers, inflation data will be in focus next week with PPI and CPI releases. Any surprises in these readings could lead to increased volatility in the markets. Additionally, retail sales data and Unemployment Claims will also be important factors to watch, especially if Unemployment Claims approach the 250K mark.
Looking ahead, the overall view of the market remains bullish with expectations of new highs in the second half of the year. While the recent bounce off the lows was encouraging, the technical picture still remains mixed with major levels yet to be tested. Shorter-term, we may see a move higher towards the 5390-5400 area, but a failure to break above could lead to a retest of lower support levels.
In conclusion, the market is at a critical juncture with various technical and fundamental factors at play. Investors should remain cautious and monitor key levels for potential trading opportunities. Remember, past performance is not indicative of future results, so it’s essential to stay informed and adapt to changing market conditions.
