S&P 500 Trading Channels to Watch
An update on the trading channels that I see in the S&P. The December ATH tested resistance of both the blue channel that has it roots in the great depression and 50-60's and the black channel that is rooted in the housing market crash. We now see the S&P correcting down to test the purple channel from 2015.
Looking at the cRSI on the weekly, even with all of the selling, we still have not seen the mean (purple line) break below the 50 level. Thus, we are still in the "green". However, you can see a steep slope to the mean cRSI. More worrying to me is the recent rally in early April did not exceed the upper cRSI bound and registered a "weak" (w) for it strength. Right now the weekly cRSI is sitting right at the traditional oversold level.
I see two main options in the short term.
1) Bull case: A short term rally off the top of the purple channel to the top of the red down channel. I just can't see us getting any higher than that. Earnings are good, but not FOMO good like the past 2 years.
2) Bear case: Loss of support and a break down into the purple channel. If that happens, we should find support at the black channels mid line or worse case down to the center of the purple channel. Either way, expect a strong rally to test the resistance of the purple channel. If this bear case does happen, IMO, you can expect the S&P to be trapped inside the black or blue channel for the next year or more.
1M - Blue Channel
1W - Black Channel
1D - Purple Channel
4h - Red Channel
Looking at the cRSI on the weekly, even with all of the selling, we still have not seen the mean (purple line) break below the 50 level. Thus, we are still in the "green". However, you can see a steep slope to the mean cRSI. More worrying to me is the recent rally in early April did not exceed the upper cRSI bound and registered a "weak" (w) for it strength. Right now the weekly cRSI is sitting right at the traditional oversold level.
I see two main options in the short term.
1) Bull case: A short term rally off the top of the purple channel to the top of the red down channel. I just can't see us getting any higher than that. Earnings are good, but not FOMO good like the past 2 years.
2) Bear case: Loss of support and a break down into the purple channel. If that happens, we should find support at the black channels mid line or worse case down to the center of the purple channel. Either way, expect a strong rally to test the resistance of the purple channel. If this bear case does happen, IMO, you can expect the S&P to be trapped inside the black or blue channel for the next year or more.
1M - Blue Channel
1W - Black Channel
1D - Purple Channel
4h - Red Channel
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