What Will it Take for the S&P500 Chart to Turn Bullish?

  • A Relative Strength Indicator: The RSI5
  • Two simple moving averages: 50-day (blue) and 200-day (red)
  • The Ichimoku cloud: see here, aka “The Cloud”.
  • The Moving Average Convergence/Divergence: MACD
  • Money Flow Indicator: MFI14

Albeit there are many more TIs, these five are my bread-n-butter indicators to help assess the index’s most likely trend. Let’s work our way down.

Figure 1. S&P500 daily chart with technical indicators

  • The RSI5 is currently at >75 and has not been this high since the correction started from the January 4 all-time high (ATH). Thus, it signals a change in trend. Bulls 1, Bears 0.
  • The index is below its 50d and 200d SMA. It will have to close above these two SMAs to re-establish a new uptrend. Compare now with October-December 2020, for example. Bulls 0, Bears 1.
  • The index is below “The Cloud.” It must close back above it (SPX4625 to signal a new uptrend). Compare now with October-December 2020, for example. Bulls 0, Bears 1
  • The MACD is on a buy and is now at higher levels than during the correction period, suggesting a new phase has started (just a bounce or new uptrend?!): Bulls 1, Bears 0.
  • Money is flowing back into stocks, and the indicator made a higher low late-February into early-March compared to late-January. But, it will have to break above the mid-February levels to signal a change in trend. Bulls 1, Bears 1.

Bottom line: the chart is currently neutral.

The overall cumulative verdict based on these TIs is Bulls 3 vs. Bears 3. Thus, although there are many other positive developments, such as in market breadth (see my Tweet here), the current price chart for the S&P500 is neutral based on these simple but effective TIs. A breakout above the SMAs and “The Cloud” is needed to give the Bulls the edge. The Bulls and the Bears will continue to slug it out on the trading floor, social media, blogs, and comments sections. But ultimately, the chart will tell us who the winner will be.

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