Since marking an intra-day recovery high a week ago last Friday the SPX Index has pulled back -2.7%. The large cap index had become stretched and was due for a price retracement. Considering that the SPX rallied 16.8% in a constructive uptrend from the mid March lows that pullback is barely a “flesh wound” and thus far has not been a short term trend breaker (more on that later in the Blog).
In the Multi-time Frame Technical Study that follows I will dig into the weight of the technical evidence to determine if the price retracement will unfold into a correction of a lesser of larger degree starting with a look at the monthly time frame.
S&P 500 Index / Monthly
After rising from Cloud support in March of 2020 the SPX Index rallied to an intra-month high (and all time high) at 4,808.93 in December 2021. When price began to fall at the start of 2022 I applied a Standard Pitchfork (red P1 through P3). I chose that Pitchfork variation because it mirrored the vector or angle of the Cloud model. Over the 9-months that followed the Index fell 19.44% but prices managed to hold above Cloud support but support at the Kijun Plot (solid green line) was violated. The SPX turned higher in October and that Price pivot at gold P3 was the genesis of a second Standard Pitchfork (gold P1 through P3). That turn was in concert with an important non-confirmation. Although my MC Oscillator registered a new low the Custom Index did not (green dashed lines). Since the higher low at the P3 price pivot low monthly candles have held support at the rising Lower Parallel (solid gold line) and the Lagging Line has held above the the Upper Parallel of the Standard Pitchfork and over the past month Also the SPX has retaken the ground above the Kijun Plot and MACD is starting to hook higher avoiding an entry into negative territory. Unless there is a break of support of the Lower Parallel (solid gold line) followed by a break of Median Line Support (red dashed line) the very long term technical condition remains positive.
S&P 500 Index / Weekly
The price pivot low in the SPX Index in Mid-March that held support at the Weekly Kijun Plot (green line) and the rally back into the Cloud that followed, along with MACD kissing its signal line and holding in positive territory gave us the confidence that the uptrend had reignited. Those technical changes gave birth to the Schiff Pitchfork (red P1 through P3). Prices retook the ground above the Cloud at the end of May but the rally stalled at the Upper Parallel of the Schiff Pitchfork two weeks ago. The one red flag that stands out to me technically, is the Fisher Transform (lower panel). The Oscillator is rolling over in elevated territory and should watched closely because more often than not it serves as the proverbial canary in the coal mine and produces early technical signals of price reversal.
S&P 500 Index / Daily #1
The constructive rally from the March 13th price pivot reversal low that followed though to early April, gave birth to the Standard Pitchfork (gold P1 through P3) that found its origin at the October 13th 2022 low (not shown here) but the rally became overbought and found itself capped at the Median Line (gold dotted line) and the SPX churned sideways to higher during the weeks that followed until early June when the SPX pushed higher. A week ago last Friday the Median Line came into play again and the SPX turned lower. That was hardly a surprise as my Daily Momentum / Breadth Oscillator had become stretched (as it had in late March) and entered over bought territory leaving the momentum tank empty suggesting a measure of “backing and filling” was in order. The six session pullback has driven the Oscillator back to neutral. Support offered by the Kijun Plot (green line) should come into play (currently 4,280) but more technically important is support at the Lower Parallel (solid gold line) of the Pitchfork which has contained pullbacks for 3 1/2 months. A violation of that support would suggest that a correction of a larger degree was unfolding potentially leaving the top of the Cloud and a Fibonacci 50% retracement of the rally from the March lows at 4,125 in the Bears crosshairs.
S&P 500 Index / Daily #2
The second Daily Chart of the SPX Index “zooms in” on the recent price action. I have added a shorter-term Pitchfork. This is a Schiff Modified variation (purple P1 through P3). Aside from two minor violations of both the Upper and Lower Parallels (solid purple lines) prices have been contained in the confines of the Pitchfork since the March price lows. Although MACD confirmed the higher high in price a week ago last Thursday, the momentum oscillator has rolled over through its signal line although it remains elevated in positive territory. Key to a bullish a technical thesis that the current price pullback is only a minor price retracement will be the large cap index’s ability to hold the cluster of support afforded by the Lower Parallel of the Pitchfork and the Kijun Plot (green line) at 4,280. A break of that level will likely quickly lead to a test of second short-term support at 4,160 as a correction of a larger degree unfolds.
I expect a good measure of window dressing going into the end of the month and more importantly the end of the first half of the year. When that dust settles the directional bias in the SPX will become clearer over the upcoming trading sessions as the second half of the year begins.
Charts are courtesy of Optuma and data is courtesy of Bloomberg.
To receive a 30-day trial of Optuma charting software go to…
To learn more about Median Line Analysis, AKA Andrews Pitchfork readers may avail themselves to a three part tutorial written by myself and Kyle Crystal. It can be found at
Comments and suggestions…tbrackett@themarketscompass.com
