Deep Analysis of the SPX
The following thread was posted on X yesterday.
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Week 24 is done as we move in closer to the summer slow months. The most important stock market indicator is the $SPX so this thread will be on that.
To start with I will review the weekly chart of the $SPX.
We had a down week and we can see from the last candle that we closed on the lower end of the week's range.
However, the $SPX price is above the 5-period moving average (white), the 10-period moving average (green) and the 20-period moving average (red).
Other positive signs are the 5-period is above the 20-period; the 10-period is likely to cross over the 20-period soon (estimate within 2 weeks).
Also, the 20-period was falling and now has turned flat. That is also a good sign.
So, overall there is no damage to the trending. It remains bullish on the weekly chart.
More on $SPX in the thread 🧵👇
This picture shows the MACD and RSI for the $SPX on the weekly chart.
We can see that MACD is making a classic upward reversal from below the 0 level and the histogram continues to increase.
The $SPX RSI on the weekly chart also has been rising slowly after being oversold and now stands at 56.
So, the MACD and RSI confirms the $SPX bullish trend on the weekly chart.
Next I move to the daily chart of the $SPX. Next I move to the daily chart of the $SPX.
The $SPX on the daily chart shows that price has fallen below the 5-day (white) and the 10-day (green) moving averages.
But price stays above the 20-day moving average (red).
The 20-day is the line in the sand for me. If price goes below that I consider that the trending has turned bearish. Until then I am watching.
Note that the 20-day continues to rise as well. That is also a sign that we have not seen a trend reversal per my system.
The other observation to make is that the $SPX price has been making higher lows and higher highs ever since the April low was touched. That trend has not been broken.
So, from both perspectives - the moving averages and the higher low, higher high trending - price remains in a bullish trend for now.
That shaded area is what I call the battlefield area because we have seen some good amount of trading volume in that range. Price remains in that zone for now living to fight on.
Now reviewing the MACD and RSI for the $SPX on the daily chart.
We do have the MACD line below the signal line just so slightly. And the crossover has happened well above the 0 line. So, this is an indication that some weakness may be coming.
Although, when we look closely, the crossover happened a few weeks back the first time. At that time price did not follow through and kept rising.
All this to say that MACD is painting a cautionary picture but not necessarily a definite confirmation of impending strong wekaness.
The RSI has reversed but still sitting at 57 which is not really bearish. The confirmation of bearish trending happens when RSI moves below the 40 level.
So, it is a wait and watch situation for the $SPX when we review from the daily chart perspective.
Now to look under the hood $SPX a little to see how the underlying stocks are performing.
Only 40% of the $SPX underlying stocks are above their 20-day moving average. This is down from 61% last week. So, certainly a negative trend.
And 70% of the $SPX underlying stocks are above their 50-day moving average. This is fine but it is down from 78% last week.
And we still only have 47.5% of $SPX underlying stocks above their 200-day moving average. This is down from 51% last week.
While the above is not technically a sign of deep weakness, we can see that on all accounts they have weakened from last week.
So again, it is wait and watch situation to see what happens on Week 25 (next week). If this weakness continues then we have to most definitely take some risk management measures.
The last thing I want to check on the $SPX is the trending of the individual sectors.
$XLK is 32.23% of the $SPX and trending remains bullish with price above the 10-day and 20-day moving averages.
$XLF is 12.22% of the $SPX and trending has turned bearish. Price is below the 20-day moving average and the 5-day has also crossed below the 20-day.
$XLY is 10.30% of the $SPX and trending has turned bearish. Price is below the 20-day moving average and it has started slowly declining.
$XLC is 9.69% of the $SPX and trending remains bullish with price above the 20-day moving average.
$XLV is 9.66% of the $SPX and trending has turned bullish. Price is now above the 20-day and the 50-day moving averages with the 20-day starting to rise.
$XLI is 8.50% of the $SPX and price just turned bearish with price falling below the 20-day moving average.
$XLP is 5.66% of the $SPX and trending is bearish with price below both the 20-day and the 50-day moving averages.
$XLE is 3.11% of the $SPX and trending has turned bullish given the oil price rising. Price is over the 20-day and the 50-day and very close to the 200-day moving averages.
$XLU is 2.43% of the $SPX and trending is bearish even though the price just closed at the 20-day moving average. The 5-day and 10-day moving averages are below the 20-day moving average.
$XLRE is 2.11% of the $SPX and price trending remains bullish as it is above the 20-day moving average.
$XLB is 1.50% of the $SPX and price trending remains bullish for now with price above the 20-day moving average.
So, $XLK, $XLC, $XLV, $XLE, $XLRE and $XLB are trending bullish. That is 6 of 11 sectors that constitute 58.30% of the $SPX.
That is why $SPX itself still remains bullish per my system.
But mostly $SPX remains bullish because $XLK remains bullish.
I do think the near-term future prospects of the $SPX are very dependent on the near-term performance of the Big Tech 11 which is $MAGS + $FNGS.
The Big Tech 11 have been underperformers so far this year and may be getting ready to lead again.
That will be the topic of my next thread.
(If you are wondering why the above does not add up to 100% of the $SPX it is because 2.59% of the $SPX is uncategorized).