Desiree Cox 1/15/25 Desiree Cox 1/15/25

The S&P 500: What’s Next After Breaking 5850?

Let’s talk about the big move we’ve been anticipating—the S&P 500 has finally dipped below our “line in the sand” at 5850. And then just as quickly, the SPX popped right back above this key support level! Here’s what stands out as I’m reviewing the chart of the S&P 500.

A Market in Red

As of last Friday, January 10, the market wasn’t exactly painting a pretty picture. The S&P 500 was flirting with lower numbers, and no sector has been spared. Growth favorites like tech? Down. Sturdy value plays like financials, industrials, and healthcare? Also down. Across the board, it was all red.

If you’ve been following along on my market recap show, CHART THIS with Dave Keller, you know we’ve been keeping an eye on the market’s weakening breadth since mid-December. This latest break below 5850 is just another confirmation of what’s been brewing: key sectors are losing steam.

Why the Close Matters

So, after a key breakdown, what happens next? First, we need to confirm that this break below 5850 is the real deal. It’s not just about dipping below that level during the day—it’s about where the market closes. Why? Because closing prices carry more weight when assessing trends.

For example, we’ve seen the S&P dip below 5850 a few times recently, only to rally back and close above it. Without a true close below that level, the market has kept the bears at bay. But if we do see a close below 5850, and the market follows through in the days after, that’s when things could start getting interesting.

After inflation data came out this week, we saw the SPX pop back above 5850 as investors considered the possibility of further rate cuts in the coming months. We feel 5850 remains the most important level to watch, because we are one lower high away from confirming a clear bearish trend for stocks.

Setting Downside Targets

If the S&P closes back below 5850 and momentum continues, where could it go? That’s where technical analysis gives us some tools to work with. Here are three ways we can identify potential downside targets:

Head and Shoulders Pattern:
There’s a possible head-and-shoulders top forming on the S&P chart. Even if it’s not textbook-perfect, it’s worth noting. By measuring the distance from the “neckline” of the pattern to the “head” and projecting downward, we land at a target of around 5600.
Fibonacci Retracement Levels:
Taking the August swing low to the December high, the 50% retracement level aligns almost exactly with 5600. This alignment adds another layer of confidence to 5600 as a significant support area.
200-Day Moving Average:
The 200-day moving average, a long-term trend indicator, hasn’t come into play for a while. Right now, it’s sitting near 5570. By the time a potential decline reaches this level, it could align closer to 5600, further strengthening this target.

When these methods point to the same general area, it’s a signal to pay attention.

The Big Picture

So, what’s the takeaway?

Keep an eye on how the market closes relative to 5850.
Watch for follow-through in the days ahead.
Look for key support around 5600, but stay flexible as market dynamics evolve.

The goal here isn’t to predict exact levels but to stay tuned into the trends and adjust as the story unfolds. And as always, the charts will guide us.

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Thanks for reading, and don’t forget to check out CHART THIS with Dave Keller, airing weekdays at 5 PM Eastern, for daily market close review. If you’re ready to take your market knowledge to the next level, check out our Market Misbehavior Premium Membership for exclusive access to in-depth analysis, actionable insights, and strategies designed to help you navigate any market condition with confidence. Don’t miss out—let’s keep building your investing edge together. Join Now!

RR#6,
Dave

Disclaimer: This blog is for educational purposes only and should not be construed as financial advice. The ideas and strategies should never be used without first assessing your own personal and financial situation, or without consulting a financial professional.

The author does not have a position in mentioned securities at the time of publication. Any opinions expressed herein are solely those of the author, and do not in any way represent the views or opinions of any other person or entity.

David Keller 8/17/23 David Keller 8/17/23

Will Gold Hold This Confluence of Support?

When different technical analysis tools all coalesce on one particular price level, this is what we call a "confluence of support." Connie Brown stressed the value of using different technical indicators based on different inputs. When these indicators agree on a particular signal or level, that’s should be a higher conviction signal to consider.

When different technical analysis tools all coalesce on one particular price level, this is what we call a "confluence of support." Connie Brown (whose book Technical Analysis for the Trading Professional has a place of honor on our Recommended Reading List) stressed the value of using different technical indicators based on different inputs. When these indicators agree on a particular signal or level, that’s should be a higher conviction signal to consider.

In today’s video, we'll show how the chart of gold (GLD) is testing a key support zone using three different technical indicators: moving averages, classic support and resistance levels, and Fibonacci Retracements. As the broader market averages continue in a risk-off mode in August, will gold find its footing and finally serve as a safe haven for investors?

What can we expect the GLD tests the first Fibonacci retracement level, and what a break lower here mean for the larger trend for gold?
Why is upward-sloping moving average such an important feature of bullish chart structures, and how important is the 200-day moving average in August 2023?
How do the momentum characteristics for gold relate to previous market cycles, and what would confirm a bullish rotation here?

For deeper dives into market awareness, investor psychology and routines, check out my YouTube channel!

RR#6,
Dave

David Keller 8/11/23 David Keller 8/11/23

Charting the Great Rotation of 2023

Growth stocks that pushed the S&P 500 and Nasdaq higher through July 2023 have now started to rotate lower, with MSFT AAPL and now the QQQ breaking below the 50-day moving average. What sectors are starting to work, and how can we use technical analysis tools to best illustrate this great rotation?

The author does not have a position in mentioned securities at the time of publication. Any opinions expressed herein are solely those of the author and do not in any way represent the views or opinions of any other person or entity.

David Keller 8/9/23 David Keller 8/9/23

What Is The McClellan Oscillator? | August 2023 Update

The McClellan Oscillator is a market breadth indicator that uses advance-decline data to gauge price momentum. This classic technical analysis technique can help validate what you see on the chart of the S&P 500 or Nasdaq, and this week it generated a key bearish signal! We'll break down the construction of this technical indicator, and talk about downside potential for the SPX given this bearish reversal.

David Keller 8/9/23 David Keller 8/9/23

Key Market Breadth Indicator Turns Bearish For QQQ

The Bullish Percent Indexes are market breadth indicators based on point & figure charts. Today we'll share the Bullish Percent Index for the Nasdaq 100, and show how a recent bearish signal is similar to previous pullbacks in 2023 and 2022.

What's the downside risk for the QQQ if market leaders like MSFT and AAPL continue their downward slide?

David Keller 8/2/23 David Keller 8/2/23

Will FAANGs Hold Their 50-Day Moving Averages?

The dominance of mega cap growth stocks like MSFT, AAPL, AMZN, NFLX, and GOOGL has been the story of 2023. Are these FAANG stocks due for a pullback, and if so, will they hold support at the 50-day moving average?

The dominance of mega cap growth stocks like MSFT, AAPL, AMZN, NFLX, and GOOGL has been the story of 2023. In the first half of the year, the FAANG stocks made incredible upside gains while the average stock led a much more meager existence return-wise.

Are these FAANG stocks due for a pullback? Will value-oriented sectors like energy and materials rotate into the driver’s seat as growth takes a breather? And how can we differentiate a short-term pullback from a broader and more painful corrective move?

In today’s video, we’ll review the strong performance of the FAANG stocks in 2023, break down some possible breakdown scenarios, and share why the 50-day moving average may be the most important barometer to watch!

What makes a chart like AAPL look so consistently strong, and what would tell us the chronic uptrend is over?
Does GOOGL’s recent bounce off its 50-day moving average give us a preview of what to expect for other large cap growth names?
If and when the 50-day moving average is broken, how can we identify potential downside targets for a correction?

Ready to upgrade your thinking on market awareness, investor psychology and routines? Check out my free behavioral investing course!

RR#6,
Dave

David Keller 6/9/21 David Keller 6/9/21

Why Use Exponential Moving Averages?

I’ve often found that for me and my process, systematic trading models are more of an input than an output. That is, I’m not a fan of completely outsourcing investment decisions to a model-based approach. However, I do see the value of having a systematic model to use as the foundation for a discretionary process built on technical analysis.

The obvious question is: how do you create a simple mechanical model to track market movements? Years ago, I dug into moving averages and quickly determined that exponential moving averages provided a much clearer representation of price trend. But how are exponential moving averages different from simple or “regular” moving averages?

In today’s video, we’ll introduce the concept of exponential moving averages and walk through a Market Trend Model using these averages on the S&P 500 chart.

· How are exponential moving averages calculated, and why do they provide a better indication of trend?

· Why do people use simple moving averages so widely, and should I still pay close attention to them?

· What is the Market Trend Model saying about the current market environment, in terms of risk-on vs. risk-off?

For deeper dives into market awareness, investor psychology and routines, check out my YouTube channel!

RR#6,
Dave

PS- Ready to upgrade your investment process? Check out my free course on behavioral investing!

Disclaimer: This blog is for educational purposes only and should not be construed as financial advice. Please see the Disclaimer page for full details.

David Keller 3/12/21 David Keller 3/12/21

Fibonacci Retracements and Bullish Gold

Gold has had a rough six months, with the gold ETF (GLD) dropping 20% since peaking in August 2020. While many consider gold to be an inflation hedge, concerns about increased inflation have not manifested themselves in higher gold prices. Now that the GLD has retraced 61.8% of its 2020 bull run, it may be setting up for a further move higher out of oversold conditions.

In today’s video, we’ll use Fibonacci retracements to set a framework for the bearish trend in gold and identify key price levels to lay out the risk/reward scenario.

How the “confluence of support” created by price support and Fibonacci retracements suggests the downtrend in gold may be exhausted
What happened to gold the last time we saw an oversold condition and how the subsequent bounce failed at a key resistance level
What may be next if gold fails to hold support at the June 2020 price level and how to properly define the risk/reward scenario

For deeper dives into market awareness, investor psychology and routines, check out my YouTube channel!

RR#6,
Dave

Disclaimer: This blog is for educational purposes only and should not be construed as financial advice. Please see the Disclaimer page for full details.

David Keller 11/9/20 David Keller 11/9/20

Improving New Highs Would Validate Further Upside

The S&P 500 wrapped a rather volatile week by settling in at the upper end of the 3200-3600 range. One key breadth indicator shows clear similarities to the bull run in early October, and also provides a prescription for bulls looking for validation of further upside.

Breadth equals participation, which means it's a way to measure how the individual stocks that make up a broad index are performing relative to the index itself. For me, my order of operations is Price, then Breadth, then Sentiment.

First, let's establish what the price is doing in terms of defining the trend direction. Second, let's review the breadth characteristics and see how the components of the index are performing and whether there is narrow or broad participation in the trend.

You can read more over at StockCharts.com.

RR#6,
Dave

Disclaimer: This blog is for educational purposes only and should not be construed as financial advice. Please see the Disclaimer page for full details.

David Keller 10/25/20 David Keller 10/25/20

Three Takes on the Presidential Cycle

This past Monday, I asked three experts on the Presidential Cycle - Bruce Fraser, Jeff Hirsch, and Tom McClellan - to share their take on market trends around the election season. They delivered in a big way, and the result was a masterclass in how to learn from market history.

In the end, I learned that the four-year Presidential Cycle is just one of many cycles, from the ten-year cycle to the traditional 12-month seasonal cycle. I learned that a key data point is whether an incumbent party wins a second term or if the White House changes hands. I learned year-end tends to be strong regardless of who wins in November.

You can read more over at StockCharts.com.

RR#6,
Dave

Disclaimer: This blog is for educational purposes only and should not be construed as financial advice. Please see the Disclaimer page for full details.

Hi I’m Dave! Thanks so much for checking out the blog. Check out our free behavioral investing course and don’t miss an episode of Dave’s daily market recap show!

“Those who can not remember the past are condemned to repeat it.”

— George Santayana