The S&P 500 stock index charted six straight weekly candlesticks, dropping almost 20% from the all-time high registered in January 2022. On top of that, the index value tested a long-term support curve – Exponential Moving Average with a period of 144 weeks – for the first time since the recovery in April 2020. Given the past weeks’ long whipsaw, it’s fair to suggest a postponed demand from the side of buyers, however, the technical outlook is getting more bearish.
The weekly chart setup below shows several signs of a bearish reversal pattern. The Ichimoku leading span performed a reversal, turning red for the first time since spring 2020. Both Conversion and Base lines entered the Cloud, pointing to a deep retracement and uncertainty phase. The index value went far from the bottom band of the Cloud, eliminating all of the gains in 15 months.
The sequence of lower lows and lower weekly close price is another confirmation of bearish market conditions. The ADX and DI indicator increased the negative surplus between the red and green lines, while the mainline kept growing, reflecting strong momentum and high volatility. All of the technical signals mentioned above suggest further selling pressure with potential whipsaws on both sides of the market.
Another weekly chart setup below shows that the Williams Alligator indicator has completed the bearish reversal after a period of uncertainty when its lines were crossing each other several times. CUrrently, all of the lines are placed in a bearish eating mode with the distance between them increasing.
The MACD indicator has the histogram in the red, while there’s a chance of a bullish divergence on it. However, both lines crossed the zero level and headed South, while the RSI oscillator printed a new lower low, which does not confirm the divergence. Thus we expect further weakening of the S&P 500 stock index. Best wishes traders!!