9 reasons why the S&P 500 should keep climbing

My favorite method of analyzing this and other indices is the Elliott Wave Principle (EWP). Still, its application must coincide with classic technical analysis to determine the most likely EWP option. Otherwise you’re literally clapping on corrugated labels in a vacuum.

Even though “past performance is no guarantee of future results‘, as is often said in this update, I’m going to look at nine different technical elements to see if – as Mark Twain once said: ‘History never repeats itself, but it often rhymes.’ See Figure 1 below.

Figure 1. S&P 500 daily candlestick charts with multiple technical indicators and moving averages

S&P 500 daily chart

Analogy with November 2021 suggests higher prices ahead

With the SPX now up nearly 500 points since the February 24 low, I compare the current rally to that which began in October 2021 and lasted through December 2021. I counted similarities between then and now. This method allows for an objective assessment of the price chart:

  1. The Bollinger bands first expanded (black arrows), then the bottoms of the lower band formed a bottom, followed by an upward movement, as did the index.
  2. The index is above the (red) 200-day simple moving average (SMA)
  3. The index is above the Ichimoku cloud
  4. The index is above the 50-day (blue) SMA
  5. The index is above the (green, dotted) 20-day SMA
  6. The index fell briefly and then rose again
  7. The RSI5 dipped briefly, but not below 50
  8. The MACD fell briefly, its histogram peaked but continued to point firmly higher
  9. The Money Flow Indicator (MFI14) remained at around 70.

bottom line

The S&P 500 is up over 500 points since the infamous Feb. 24 low. An objective analysis of the recent rally (October-December 2021) shows that there are (at least) nine similarities between then and now. Back then, the rally paused briefly before gaining ~4.5%, followed by a more significant correction (-5.3%).

The index took a short break in the middle of last week and has already started to recover. Similar to the October-December ’21 Rally. Based on these nine similar technical analysis setups, the odds for the current rally should make new uptrend highs (think SPX 4750 +/-50) before a more significant correction (think ~SPX 4350 +/-50) should follow. )

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