S&P500: Recovery Or Capitulation?

Technicals | Mar 15 2022

By Michael Gable 

The past week has been extremely volatile with share markets making little to no progress. The S&P 500 Index continues to chop around, but we believe that we are getting close to a resolution here. This week's report has an updated chart on the S&P 500 Index and what the we need to see on it in order to be confident that a low is in place.

In late February, we had what appeared to be a "false break" where the S&P 500 Index broke under support but quickly recovered. The last several days has seen price action deteriorate again and risk is once again slightly to the downside. On a positive note, though, we have noticed the "bullish divergence" between price and the RSI. That is, downside momentum bottomed out in January and has trended higher while the price has trended lower.

This is an indication that we getting close to a low as downside momentum fades. We still remain open to the idea of a final capitulation that would see a sharp decline from here. However, the bullish divergence means that the bounce back would be just as swift. The end result is that there are two scenarios to make the S&P 500 Index look positive again. Firstly, a capitulation followed by a strong bounce would be a positive. The second scenario would be a push from here back above 4300 in the short-term. In the meantime, we expect further chop in the range.

Content included in this article is not by association the view of FNArena (see our disclaimer).
 
Michael Gable is managing Director of  Fairmont Equities (www.fairmontequities.com)

Fairmont Equities is a share advisory firm assisting Private Clients with the professional management of their share portfolio. We are based in the Sydney CBD but provide services to private clients across Australia. We believe that the concepts of fundamental analysis and technical analysis of stocks are not mutually exclusive. Regardless of whether you are a trader or long term investor, combining both methods is crucial to success. As a result, the unique analysis of Fairmont Equities is featured regularly in the media such as Sky News Business, CNBC, The Australian Financial Review, and the ASX newsletter. Contact us for a free trial of our research and information on our portfolio management services. 

Michael is RG146 Accredited and holds the following formal qualifications:

• Bachelor of Engineering, Hons. (University of Sydney) 
• Bachelor of Commerce (University of Sydney) 
• Diploma of Mortgage Lending (Finsia) 
• Diploma of Financial Services [Financial Planning] (Finsia) 
• Completion of ASX Accredited Derivatives Adviser Levels 1 & 2

Disclaimer

Fairmont Equities Australia (ACN 615 592 802) is a holder of an Australian Financial Services License (No. 494022). The information contained in this report is general information only and is copy write to Fairmont Equities. Fairmont Equities reserves all intellectual property rights. This report should not be interpreted as one that provides personal financial or investment advice. Any examples presented are for illustration purposes only. Past performance is not a reliable indicator of future performance. No person, persons or organisation should invest monies or take action on the reliance of the material contained in this report, but instead should satisfy themselves independently (whether by expert advice or others) of the appropriateness of any such action. Fairmont Equities, it directors and/or officers accept no responsibility for the accuracy, completeness or timeliness of the information contained in the report.
 

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