• Home
  • Contact
  • Privacy Policy
  • Store
my forex coaching
+
  • For Beginners
  • Strategies
  • Crypto
  • Technical Analysis
  • Stock Trading
  • Product Reviews
  • News
  • Videos
No Result
View All Result
  • For Beginners
  • Strategies
  • Crypto
  • Technical Analysis
  • Stock Trading
  • Product Reviews
  • News
  • Videos
No Result
View All Result
my forex coaching
No Result
View All Result
Home Technical Analysis

Wilting Bullish Momentum Foreshadows Possible Pullback

Forex Tips by Forex Tips
November 20, 2021
in Technical Analysis
0
Wilting Bullish Momentum Foreshadows Possible Pullback
189
SHARES
1.5k
VIEWS
Share on FacebookShare on Twitter


S&P 500 WEEKLY OUTLOOK: SLIGHTLY BEARISH

  • The recent rally in the S&P 500 has been driven by the stocks with the largest weighting in the index
  • Deteriorating breadth and limited upside participation point to low confidence in the broader market
  • Failed attempts by the S&P 500 to break above the 4,700 level may be a sign that buying momentum is waning and a pullback may be just around the corner

Most read: How to Research Stocks: A Step-by-Step Guide

The S&P 500 has been on an impressive bullish run recently, climbing roughly 10% from last month’s low to new all-time highs, supported by strong third-quarter corporate earnings, constructive profit guidance and positive sentiment. The gains, however, have not been widespreadamong the benchmark members as the secular mega-caps with the largest weight (Microsoft, Apple, Amazon, Alphabet and Tesla to name a few) have been the main drivers behind the explosive rally.

From a technical standpoint, weakening breadth and limited upside participation point to fragile investor confidence in the broader market and thus unhealthy fundamentals. If a stock index only relies on a few names to move higher, it is not firing on all cylinders, so there must be weakness behind the scenes. To analyze current dynamics, we can look at the relationship between the equal-weighted S&P 500 and the capitalization-weighted S&P 500, using the RSP ETF as tradable proxy for former and the SPY ETF for the latter.

The chart below has two panels. The top one shows SPY by itself, while the bottom one displays the RSP/SPY ratio. After examining price action from the past two months, we can see that SPY has been rising steadily since early October, while the RSP/SPY ratio has been declining, falling on Friday to its lowest level since February. This behavior suggests that buying interest is concentrated in the large and most influential stocks, with money flowing disproportionately into the heavy hitters rather than to the smaller and average companies that are part of the benchmark (if the smaller companies were driving the rally, the RSP/SPY would slope upwards).

SPY AND RSP/SPY RATIO CHART

S&P 500 Technical Forecast: Wilting Bullish Momentum Foreshadows Possible Pullback

Source: TradingView

When upturn participation is not broad-based, anyrallystands on shaky footing, so markets can bemore vulnerable to a pullback should the winds shift and sentiment change. For this reason, traders should become less complacent and start exercising more caution, particularly during the U.S. Thanksgiving holiday week as thinner liquidity can amplify market moves unexpectedly.

S&P 500 TECHNICAL ANALYSIS

Focusing on the S&P 500 index, the technical bias remains positive in the medium term, but in the short term, the ongoing rally appears to be losing momentum as the RSI indicator flirts with overbought territory and price struggles to break above the psychological 4,700 level decisively.

In terms of price action, failure to clear the 4,700 area after numerous attempts in the last few days suggests that buying interest is fading, awarning that a downturn may be in sight. If a pullback does materialize, the index could head towards the 4,630–support zone before staging a rebound, although a move below that floor could accelerate the decline and expose the 4,580 area.

On the other hand, if the S&P 500 defies expectations and manages to overtake the 4,700-barrier in a resolute fashionin the week ahead, bullish sentiment could strengthen, allowing the index to charge higher towards channel resistance near 4,760.

S&P 500 TECHNICAL CHART

S&P 500 Technical Forecast: Wilting Bullish Momentum Foreshadows Possible Pullback

S&P 500 (SPX) Chart by TradingView

EDUCATION TOOLS FOR TRADERS

  • Are you just getting started? Download the beginners’ guide for FX traders
  • Would you like to know more about your trading personality? Take the DailyFX quiz and find out
  • IG’s client positioning data provides valuable information on market sentiment. Get your free guide on how to use this powerful trading indicator here.

—Written by Diego Colman, Contributor





Source link

Share76Tweet47

Related Posts

US Dollar Technical Forecast for the Week Ahead: USD Correction Over?

US Dollar Technical Forecast for the Week Ahead: USD Correction Over?

by Forex Tips
August 7, 2022
0

US Dollar Technical Price Outlook: DXY Weekly Trade LevelsUS Dollartechnical trade level update – Weekly ChartUSD correction off uptrend...

Japanese Yen Technical Forecast: USD/JPY, EUR/JPY, GBP/JPY, AUD/JPY

Japanese Yen Technical Forecast: USD/JPY, EUR/JPY, GBP/JPY, AUD/JPY

by Forex Tips
August 7, 2022
0

Japanese Yen Technical Forecast: BearishThe Yen came into the week with a full head of steam, continuing to gain...

Anticipation Around UK GDP Heightened by Recessionary Fears

Anticipation Around UK GDP Heightened by Recessionary Fears

by Forex Tips
August 7, 2022
0

POUND STERLING TALKING POINTSUK GDP in focus.Technical analysis shows market uncertainty.GBP/USD FUNDAMENTAL BACKDROPThe Bank of England (BoE) rose interest...

S&P 500, Nasdaq 100, Dow Jones Forecast for the Week Ahead

S&P 500, Nasdaq 100, Dow Jones Forecast for the Week Ahead

by Forex Tips
August 6, 2022
0

Indices Technical Forecast: NeutralThe market continues its counter-trend rally, but could stall at any timeThere are levels above in...

Bitcoin (BTC/USD) & Ethereum (ETH/USD) Technical Outlook

Bitcoin (BTC/USD) & Ethereum (ETH/USD) Technical Outlook

by Forex Tips
August 5, 2022
0

BTC/USD, ETH/USD Technical Outlook:BTC rally looks like a recovery before another big leg lowerETH has shown a little more...

Load More
Forex Pulse Detector
  • Trending
  • Comments
  • Latest
Engulfing Candle Patterns & How to Trade Them

Engulfing Candle Patterns & How to Trade Them

November 28, 2021
This is How You Can Make Money with Cryptocurrency

Dogecoin (DOGE) Price Prediction 2021

November 12, 2021
How to Trade the S&P 500 Index: Trading Strategies

How to Trade the S&P 500 Index: Trading Strategies

November 13, 2021
How High Will Ethereum Go

How High Will Ethereum Go

November 13, 2021
US Dollar Technical Forecast for the Week Ahead: USD Correction Over?

US Dollar Technical Forecast for the Week Ahead: USD Correction Over?

0
00 GMT when FTSE 100 traded near 6,515.80.

00 GMT when FTSE 100 traded near 6,515.80.

0

3 Reasons to be Bullish on Energy Stocks

0

What are the Differences Between Forex Demos and Real Accounts?

0
US Dollar Technical Forecast for the Week Ahead: USD Correction Over?

US Dollar Technical Forecast for the Week Ahead: USD Correction Over?

August 7, 2022
Hodler’s Digest, July 31-Aug 6

Hodler’s Digest, July 31-Aug 6

August 7, 2022
Japanese Yen Technical Forecast: USD/JPY, EUR/JPY, GBP/JPY, AUD/JPY

Japanese Yen Technical Forecast: USD/JPY, EUR/JPY, GBP/JPY, AUD/JPY

August 7, 2022
Gold Price Outlook Mixed After Blowout NFP Report

Gold Price Outlook Mixed After Blowout NFP Report

August 7, 2022
Forex Pulse Detector

Categories

  • Alerts
  • Crypto Strategies
  • Currency
  • For Beginners
  • Forex News
  • Forex Trading Tips & Strategies
  • Technical Analysis
  • Videos

Newsletter

  • Home
  • Contact
  • Privacy Policy
  • Store

© 2018 Forex Blog

No Result
View All Result
  • Contact Us
  • Homepages

© 2018 Forex Blog.

Posting....