Long-term S&P 500 Analysis

The last short-term S&P 500 forecast was published on July 14, when the S&P 500 closed at 2,109, and included the following forward guidance:

Stocks are reaching overbought territory, so resistance at 2,115 – 2,125 is worth watching for a pullback or relapse. Support (and an open chart gap) around 2,080 may be a low-risk spot to buy. Failure to hold 2,080 and more importantly 2,040, could unlock much lower targets.”

Resistance held. At the time of analysis (July 14), 2080 seemed like THE key level, but late last week I discovered the following S&P 500 pattern, shared via Sunday’s (July 26) Profit Radar Report.

The weekly S&P 500 chart shows three developments worth a look.

  • Since 2012, the S&P 500 found support at or near the 50-week SMA several times.
  • Last week’s red candle put in a bearish engulfing week and painted a formation called ‘bearish harami’. In recent times, bearish haramis haven’t been as bearish as they used to be.
  • Last week’s drop triggered a bullish percentR low-risk entry (click here for explanation of percentR).

In itself, none of the above three developments allows for a high probability forecast, but when combined, they would allow for a brief intra-week test of the 50-day SMA (2,053) without ‘killing’ the option of another high before a deeper correction into October.”

This week, the S&P 500 fell within 8 points of its 50-week SMA and S&P bounced again.

S&P 500 seasonality suggests higher prices, but breadth is terrible. With or without new highs, a deeper correction (possibly into October) is likely.

A move below the 50-week SMA and support at 2,040 would caution that the correction has begun.

Continued S&P 500 analysis is available to subscribers of the Profit Radar Report.

Simon Maierhofer is the publisher of the Profit Radar Report. The Profit Radar Report presents complex market analysis (S&P 500, Dow Jones, gold, silver, euro and bonds) in an easy format. Technical analysis, sentiment indicators, seasonal patterns and common sense are all wrapped up into two or more easy-to-read weekly updates. All Profit Radar Report recommendations resulted in a 59.51% net gain in 2013 and 17.59% in 2014.

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