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Analysis

Chart of the week – Aging bull of SPX 500 managed to survive

s&p 500

Chart of the week – SPX 500 

Aging bull of SPX 500 managed to survive 

Short to medium-term technical analysis

Time stamped: 27 Feb 2022 at 1:00pm SGT (click to enlarge chart)

Source: CMC Markets

  • It has been a high-octane volatile ride for the benchmark US SPX 500 Index since the start of year as its significant weightage technology related components stocks took a hit to the downside due to their higher sensitivities towards the risk of an impending liquidity squeeze via the tightening of monetary policy in the coming months as well as heightened geopolitical risk triggered by the Russia-Ukraine crisis.
  • Last week, the SPX 500 recorded a drawdown of -5.4% on the onset of the Russian’s invasion into Ukraine and the sanctions imposed on Russia thereafter before it managed to erase all its losses in the last two sessions of last week. It ended with a weekly gain of +0.82%.
  • Interestingly, the remarkable bullish reversal has occurred the second time after a breach below the 4,240 key long-term pivotal support but managed to stage a weekly close above 4,240 on last Friday at 4,385. In addition, it has formed another bullish weekly “Hammer” candlestick pattern, a similar observation that has occurred on 24 January 2022.
  • Thus, the aging bull (13-year of secular uptrend since the GFC low of March 2009) of SPX 500 has managed to survive to fight another day. Based on Elliot Wave/fractal analysis, the price movements of SPX 500 is likely to be in the midst of undergoing the final wave V (the rally of “hope & irrationality”) of its long-term secular uptrend phase in place since March 2009 low before a potential multi-month corrective decline sequence unfolds (see weekly chart) as more seeds of stagflation may be sowed due to the medium-term negative ramifications from the on-going Russia-Ukraine crisis that is likely to keep global inflationary pressures at elevated levels.
  • In the short-term, a break above 4,470 may see a further potential rally for the SPX 500 to retest the 4,590 medium-term range resistance in the first step where prior price actions have failed to break above it on 3 February 2022 and 10 February 2022.  On the flipside, a daily close below the 4,240 key long-term pivotal support opens up scope for the bears to push it down to retest the 24 February 2022 swing low of 4,107 and a break below it exposes 4,035/4,000 next. Only a weekly close below 4,240 invalidates the final wave V (the rally of “hope & irrationality”) and may kickstart the potential major corrective decline sequence (see 4-hour chart).


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