Our short-term signal turned red today, but our mid-term signal is still green, and the RiskSIGNAL remains firmly red.
Key Fundamentals
In late October, the S&P 500 made a significant recovery, moving up from just below its current range and approaching the upper limit at the start of November.
The newly established midpoint of the range, at 4,288, is particularly noteworthy. This level is where stocks initially tried to stabilize in September before declining to new lows. Interestingly, this midpoint also aligns with the highs reached in August 2022, a point where the market experienced a sharp downturn.
Furthermore, the lower boundary of the current target range, set at 4,200, served as a resistance level for the S&P 500 during the first five months of the year. The market only began to rally beyond this point in early summer. This level also represents a pivotal area where the market formed a short-term bottom in late September.
Conditions Improve:
The key observation from the charts is quite clear: if the S&P 500 approaches its 'better-if' price target of 4,750, it would be nearing its all-time highs. For context, the early 2022 closing high was at 4,796.56, with the peak intraday value reaching 4,818.62.
Should the S&P 500 advance towards or beyond 4,700, we can anticipate increased technical resistance. This is likely as investors who have held long positions may start taking profits near these recent, significant highs (which have lasted for more than a year), and short-sellers might predict a potential 'double top' formation.
Conditions Deteriorate
On the other hand, if the S&P 500 approaches the 'worse-if' upper range limit of 3,825, which is just 15 points shy of the index's 2022 year-end value and close to the level where the March downturn, spurred by banking sector contagion fears, bottomed out, there's a technical basis to expect this level to provide intermediate-term support. This scenario is particularly relevant if we witness a resurgence in market volatility.
And remember - The one fact pertaining to all conditions is that they will change.
Feel free to use me as a sounding board.
Best regards,
-Kurt
Kurt S. Altrichter, CRPS®
Fiduciary Advisor | President