S&P 500: How Can Anyone Buy This High?! – Week Starting 1st April (Technical Analysis)

The S&P500 (SPY) ended Q1 and the month of March at 5254. It has gained 28% in lower than six months and now has a PE ratio of 24.6. How can anybody purchase this excessive?!

Truly, it isn’t that tough; the secret’s to clean out how overvalued you suppose it could be, or how far it might fall, and defining (minimizing) your threat towards a degree the place you understand your commerce concept is incorrect. In every article I present steering to the place the pattern will shift from bullish to bearish and that is an optimum entry level. In case you are incorrect, you will not be incorrect for lengthy and should not lose a lot cash.

For instance, final weekend’s article concluded, “a small dip ought to maintain 5179-89 within the first half of the week and result in new highs.” Tuesday’s dip to 5203 was due to this fact a possibility to purchase towards the highlighted stage. Granted, the features could also be restricted, however there was about 30 factors threat for a possible 60, 90, (who is aware of how a lot on this loopy pattern), reward.

This weekend’s replace will take a look at expectations for Q2 and once more spotlight essential ranges for the pattern to carry. Numerous strategies can be utilized to a number of timeframes in a top-down course of which additionally considers the most important market drivers. The intention is to supply an actionable information with directional bias, essential ranges, and expectations for future worth motion.

S&P 500 Month-to-month

March and Q1 closed at 5254, simply 10 factors off an all-time excessive. The percentages are due to this fact closely in favour of continuation in April and Q2. Moreover, seasonality is sort of sturdy and there’s no actual resistance.

Wanting additional out, when January, February and March all shut larger like they’ve this yr, the remainder of the yr has closed larger 19 out of 20 instances.

Whereas that is an fascinating stat, there’ll nonetheless be dips alongside the way in which. As soon as new highs are made, the next timeframe reversal can develop with a drop again into the March / Q1 vary. We would wish to see how April closes earlier than deducing something, however it’s one thing to bear in mind.

To date, there was little or no response at any of the earlier Fib targets. There’s a measured transfer at 5371 the place the rally beginning on the January low is the same as the October-December ’23 rally.

The March excessive of 5264 and the February excessive of 5111 are probably essential ranges to the draw back.

April can be bar 5 (of a doable 9) in an upside Demark exhaustion rely.

S&P 500 Weekly

The weekly chart is again to the standard sample of 2024 with the next excessive, larger low and better shut. That is consolidating the earlier break above 5189 and tasks continuation subsequent week.

The 5179-5189 breakout stage is essential. Ought to this break, the hole at 5117-5131 is an space for a bounce, however 5048-5056 is the probably vacation spot.

An upside Demark exhaustion sign is lively, however maybe the 2 week pause within the first half of March is the one response it’s going to get. A brand new sign is at the least 7 weeks away.

S&P 500 Every day

The every day chart continues to carry the pattern channel and 20dma. It additionally continues to comply with the repeating sample from February I first highlighted two weeks in the past. This now suggests the transfer to new highs will unwind again to 5203 with a pointy drop just like March fifth. Clearly, neither the repetition or the pattern channel can proceed indefinitely, however a pointy dip again to 5203, possibly the 5190s may very well be a low threat alternative to commerce towards a breakdown.

The highest of the channel can be at 5310 and rising round 10 factors a day.

5203 is a weak low / shut and sure re-visited and undercut. 5179-89 is extra essential and will line up with channel assist and the 20dma.

Final week’s Demark exhaustion sign didn’t full because of the uneven situations. A brand new rely can be on bar 3 on Monday and can’t full subsequent week.

Drivers/Occasions

Friday’s launch of the Core PCE Value Index confirmed a studying of 0.3% and final month’s figures was revised larger to 0.5%. There was a transparent tick larger in latest months and the 3-month annualized determine has elevated from under 2% to three.5%. Given the Fed’s latest dovish communication, I believe they may keep quiet and hope this downside goes away. That mentioned, Powell is because of converse on Wednesday so pay shut consideration.

Earnings season is already underway however solely actually will get fascinating in mid April when the large banks report. With the financial system hotting up in Q1, the numbers must be stable sufficient, however have loads to dwell as much as – in keeping with the S&P, earnings are anticipated to develop 30.6% by the tip of 2025.

With a lot development anticipated and priced in, sturdy knowledge is a should and this week’s Ultimate GDP of three.4% (est. 3.2%) is the type of factor bulls will need to see, particularly because the Fed prompt there isn’t any studying too sizzling or too excessive for them to rethink cuts. Subsequent week’s Jobs Report ought to produce a bullish response so long as it’s sturdy or consistent with expectations. A giant miss could be one thing totally different and maybe an fascinating inform – will the market fear in regards to the financial system or rejoice as cuts are extra assured? It might be the latter initially, however the latest rally does counsel the market cares extra in regards to the financial system/earnings than it does about cuts so I am engaged on the idea that weak knowledge will equal a weak market.

Possible Strikes Subsequent Week(s)

The sturdy near March and Q1 tasks continuation to new highs in April and Q2. 5300 and 5371 are the following upside targets.

Watch out of a failed new excessive that rapidly reverses as it could counsel the repeating sample on the every day chart can proceed with a pointy drop again to undercut the weak low of 5203. This is able to check the channel and the 20dma which is essential for subsequent week and certainly the remainder of April.

As there are numerous eyes on the now apparent channel, spikes and “messy” motion might unfold. 5179 is a extra outlined inflection level – a break of this stage would affirm the near-term pattern is compromised and weekly helps of 5117-5131 and 5048-5056 ought to then be in play.