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Technical Support Starting to Form

The wild year continues, with up’s and down’s becoming the norm. Look no further than the big bank analysts and you’ll discover plenty of opinions about where the market is headed. Some optimists suggest the SPX is headed back toward near-5000 levels. The bearish suggest closer to 3000 by year end.
Frankly, looking out to the end of the year feels ‘long term’ given the wild ride we’ve had so far. Of course, three months is nowhere near long term in reality. But tell that to the markets.
Last week finally saw some traction as major indexes started to climb again. Good! It had been three weeks of declines. Nice to see things turn the other way.
The question continues: new bull market, or bear market rally?
Too early to call. In fact, we probably won’t know until it’s already well underway. So why trouble one’s self with this question? Investors invest. If good analysis can improve the tactics along the way, the results can improve. So let’s look at the set-up.
For the week, support seems to be forming at the trough of the 50-day moving price average. Last week markets moved higher, and the 50-day and 100-day moving averages are at the crossover point. Seeing the 50-day move above the 100 would be a bullish (though weak) sign that things continue to improve.
The fact the directional trend of the 50-day has moved from negative to positive is also a good sign. Both the 100- and 200-day moving averages still have a negative trend. Hence the reason the 50-day is still pretty weak.
From an over-bought/over-sold perspective, the SPX looks pretty neutral at this point. The VIX also looks pretty neutral. All of this is to suggest the buying can continue.
One of the simple reasons the markets may get a tailwind is the slight weakening of the dollar. This could improve the outlook for US exports to global markets. It also shows in the moves in Bitcoin, which rallied over 10% recently.
For the week, look for an overall positive trend with a test of the 4114 level first, followed by a test of 4157 if the market pops in the first day or two. The first level of support is at 3919.05
Have a great week!
SPX Outlook for the week of September 12, 2022


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