Charts For The S&P 500 Show Significant Downside Risk

The S&P 500 Index (SPX) set its 2022 low of 4,222.62 on January 24 below its annual pivot at 4,383. Its February 11 close of 4,418.64 is above this level. Its semiannual value level is 4,125. SPX closed below its 50-day and 200-day simple moving averages at 4,608.75 and 4,452.06. SPX is below its quarterly pivot at 4,528.

The S&P 500 is down 7.3% year-to-date and is 8.3% below its January 4 high of 4,818.82. Back on March 23, 2020, the S&P bottomed at 2,191.86 and is still up a solid 101.6%.

The Daily Chart for SPX

The daily chart for the S&P 500 shows the index rising solidly above its 200-day simple moving average (in green) until January 21. It tracked the 50-day simple moving average (in blue) until it closed below this average on January 13. The 200-day SMA has been a magnet since January 21.

The top two horizontal lines are the monthly risky level at 4,794 and the quarterly pivot at 4,528. The third horizontal line is the annual pivot at 4,383. A gap below this level indicates risk to the lowest horizontal line at 4,125 which is the semiannual value level.

Beware that a death cross occurs if the 50-day SMA falls below the 200-day SMA.

The Weekly Chart for SPX

The weekly chart for the S&P 500 has been negative since the week of January 14. The index is below its five-week modified moving average at 4,531.04. The rally to the high began from its 200-week simple moving average when it was 2,648.91 during the week of April 10, 2020.

The 12x3x3 weekly slow stochastic reading along the bottom of the chart is 42.34 after falling below 80.00 during the week of January 14. The weekly slow stochastic scales from 00.00 to 100.00 where a reading above 80.00 is overbought and a reading below 20.00 is oversold.

The Monthly Chart for SPX

The monthly chart goes back to the ‘Crash o 1987.’ It’s hardly readable so recent strength is significantly overbought. The 12x3x3 monthly slow stochastic reading peaked at 96.60 in July 2021.

The green line is the 120-month simple moving average. This lines up with an uptrend between the low of 666.79 during the week of March 2009 and the low of 2,191.86 during the week of March 2020.

A bear market is a possibility if the semiannual value level at 4,125 fails to hold. The key for stability is staying above the annual pivot at 4,383.