S&p500, The Story Continues

2018년 11월 11일

As predicted mid-summer in my previous S&P analysis (linked below under related ideas), the US elections may have created a state of temporary panic within the US markets. Confidence being a large driver of any economic market (as seen in the Brazilian markets upon the anticipation of a capitalist president being elected), this temporary state of political confusion and panic appears to have been one of the leading factors influencing the decline observed in the last few weeks (1). The price reversal following the results of the 2018 Midterm elections appears somewhat bullish, however I am still leaning on a more cautious side. The daily price has reached a Green9 signaling a price reversal is approaching. That said, this current price movement rejected the current resistance zone at the end of the trading day last Wednesday (Green7 candle) the 7th, which led to a Green9 becoming a red candle. Under normal conditions I would expect that a market exhaustion (Green9) would be followed by a Red1-4 candle correction (visible on the weekly chart), then continuing its bullish price movement. However, the Friday candle closed on a Red Candle with a wick testing the 50 Day Moving Average. This forces me to be more cautious, even thought the 50 Day Moving Average acted as support for the price movement. RSI is currently at a support zone, zone being a trendline which i left out on this chart (2). A price reversal would force the RSI to move onto its next support zone. Lastly, the MACD appears to be beginning to turn downwards. However, it is too early to confirm this.

1. For the time being, it appears the market has decided that a Democratic run House and a Republican run Senate is doable. American's government greatest strength is also its greatest weakness (weakness in selective situations) continuously providing checks and balances to the party in current control. The market loves its political balances for it is more predictable. Any party maintaining power for too long over all three branches of government is not always favorable.

2. Reasonably argued, a number of traders are not in favor of trendlines being attached to market Indicators as they feel this form of trend criteria is not reliable enough as compared to price trendlines in order to help validate potential future price movements.