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Technical Analysis

US Stocks - Approaching Important Resistance

by Antonis Benis, on Jan 20, 2021 4:20:01 PM

Last time I analyzed the US stock markets was on December 11th.

Since then, the rally continued with no significant breaks; however it is now approaching resistance that may prove to be an important one.

  • NYSE and High yield Bond Advance/Decline line still strong; no divergence there.
  • Yield curve still bullish.
  • Market sentiment and valuations at extremes, typically seen at major market tops.
  • Seasonality turns negative around now into February.

HKCM ABO 2020


S&P 500

S&P 500 (SPX) has a weekly sequential countdown at 12, needs one more higher close this or next week. The daily sequential is at 11, propulsion exhaustion level at 3907,5 (see charts 1,2)

SPX Demark weekly

 

SPX Demark


Gann Analysis

I have prepared converted into euros charts of the S&P 500 and Dow Jones 30. It is apparent that US stock indices have rallied partly on the back of a weakening US dollar. S&P has just now exceeded the 2020 high and is facing significant resistance at the 3x16 c angle. One more thing that is obvious from this chart, is that the 2002- 2007 rally was just a bear market rally. Dow Jones is still lagging far below the 2020 high (see charts 3,4).

SPX converted into euros

DOW 30 converted into euros

S&P 500 (fut.): resistance at 3830/3846 and 3905, plus the 3x10 c angle (see charts 5,6)

S&P fut. w

S&P fut.  d

Russell 2000 (spot): resistance at 2174/2187 and the 25x4 m Gann angle (see chart 7)

RUSSELL 2000 w

I have shown a cycles chart of the S&P 500, using monthly bars in my last report. Here is an update, it suggests a major bottom in late summer/fall of 2022. It fails to catch the tops, it matches the bottoms rather accurately however. Note that cycles are all about turning points, not about the magnitude of the moves (see chart 8).

TS- S&P m

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Conclusion

An important top is expected this or next week, followed maybe by a 10+% correction. Markets should rally even higher after this, fueled by central bankers and ambitious politicians. At some point, interest rates/inflation will put a brake on their ambitions. For now, be very cautious; markets may still rally 1-3% higher, before giving the gains back.


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Topic:Trading SignalsActive TradingS&P 500Russel 2000Analysis and StrategyTechnical Analysis
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