Thursday, August 20, 2015

Reversal pattern in S&P500

Stock indexes, including S&P 500 have been going up since 2009 with no major reversals since 2013. Looking at a weekly chart we can see that the picture might be turning bearish bit by bit. You can clearly see that since February, 2015 price wasn’t really advancing upward. On the contrary, a visible head and shoulders pattern is present on a weekly chart. 2120-2150 was the area where price of the index would be rejected again and again. This can lead us to a mildly conservative conclusion that a collapse in stocks might be coming sooner rather than later. 

We would not claim that if there were not any signs of that. But now signs are there clearly seen on the weekly chart and price action confirms an upcoming crash. It would be difficult to say how far and how fast the price will go, but taking into account all uncertainties in Europe with countries compiling huge public and private debts (US leading the way) it might be time to quite trading risky assets and jump into more conservative ones like gold or Swiss Franc. 

We can also see that 50 sma on a weekly acts as support, but nobody can be sure for how long. 

S&P 500 weekly chart

A daily chart also displays an attack on support where 200 sma and ema indicators are. In fact, we might see a daily price close below these two important indicators. That would be a very bearish signals. We did see two of those within a year and nothing really happened.  But again, you can never know when the signal will work.

Anyway, more and more bearish signals appear in the market and not only S&P 500, but European, Asian and other stock markets will turn down soon. Chinese Shanghai index could lead the way as the Chinese government is trying to slow down the collapse now. I doubt if they are able to combat powerful forces of financial market. So, let’s wait and see what happens. 

S&P 500 daily chart

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