S&P 500 Is On The Rise But The Upside Appears Limited. Downside Risk Is Significant.

The S&P 500 Index (SPX) traded as low as 3,363.87 on June 17 and it’s nearing its 200-day simple moving average at 4,327.50. Above this average are the annual pivot at 4,383 and its semiannual risky level at 4,473. If you bought on weakness towards the June low, the 52-week high was 4,818.62 set on January 4. The value level for August is 3,987.

The Daily Chart for SPX

After setting its all-time high of 4,818.62 on January 4, the S&P 500 had a decline of 24.5% to its June 17, 2022, low of 3,636.87. The rise from this low to the 200-day simple moving average at 4,327.50 will be 18.9%.

A death cross occurred on March 14 when the 50-day simple moving average fell below the 200-day simple moving average. This resulted in the decline to that June 17 low.

The S&P is below its annual pivot at 4,383 and its semiannual risky level at 4,473 which are the higher two horizontal lines. The lower horizontal line is the monthly value level for August at 3,987.

The 50-day SMA is 3,954.89 with its 200-day SMA at 4,327.50.

Weekly Chart for SPX

The weekly chart for the S&P 500 is positive with the index above its five-week modified moving average at 4,109. The horizontal lines from top to bottom are the semiannual risky level at 4,473, the annual pivot at 4,383, and the monthly value level at 3,987, respectively. The 200-week simple moving average or ’reversion to the mean’ is at 3,555.

The 12x3x3 weekly slow stochastic reading is rising at 76.68. The chart becomes overbought when this calculation rises above 80.00.

Monthly Chart for SPX

The monthly chart goes back to the “Crash of 1987,” which is at the lower left-hand corner of this chart.

The green line is the 120-month simple moving average. Note that the S&P 500 is below its annual pivot for 2022 at 4,383, which is the horizontal line at the upper right of the chart.

The 12x3x3 monthly slow stochastic reading peaked at 96.60 in July 2021. It’s now declining at 38.09, which is negative.

A bear market is a possibility. From the January high of 4,818 to the 120-month SMA at 2,669 would be a decline of 44.6%.