S&P500 hit resistance in recent weeks at the SMA 200 and the weekly +1 ATR, a level that has not been breached by the index since the beginning of the bear market. S&P500 is down more than 9 percent from the top of its summer rally.

Support and resistance change places. The upper edge of the congestion zone that stopped the S&P500 declines in October 2021 and again in 2022 has now halted the summer rally.

Last week I emphasized that the S&P500 was approaching an important congestion zone, formed by several powerful components. The S&P500, already significantly overbought at +3ATR, was crossing the zone between 4200-4300 that had stopped the decline between October 2021 and May 2022 and that now works as strong resistance. Only a few ticks above this range lay the SMA 200, an indicator widely followed by traders and considered a watershed between bull and bear markets. In the midst of the resistance zone (at the 4260 level), lies the 78.6 percent of the Fibonacci retracement, calculated from the lows of the Covid selloff. Tuesday’s false breakout, which failed just 1 tick below the SMA 200, triggered the correction, which, for now, has the characteristics of a normal correction in an overbought situation.

On Friday, the daily S&P500 closed just ticks below its +3 ATR and at the upper edge of former support zone between October 2021 and April 2022, that is now acting as a resistance area. A pullback to value would not be unexpected.

After the historically longest period [in our 6-year database] spent in extreme fear readings, FGIC returned to its neutral zone, adding the latest in to a numerous series of bullish signals.

There were no major changes this week.

There were no major changes this week.

The weekly S&P500 closed well above –1 ATR, while the daily reached +2ATR and fell but held above its value zone. We had numerous bullish SpikeTrade signals in recent weeks and price is responding to them.

Both NH-NL and FGIC have gradually but steadily increased since mid-June. A long series of bullish signals occurred during this period. On Friday we received yet another Spike Bounce signal (medium) and a V2 trigger. In a bull market, each of these signals would have suggested a buy on a dip, but a bear market such as the current one requires much more stimuli.

The holiday-shortened week began with two bullish signals, a V1 trigger and a weak Spike Bounce. For the last two days the S&P closed above the value zone, the new lows finally fell below 500 on both days.