The previous week was filled with numerous data disclosures that provided deeper insights into the U.S. economy. Most notably, we saw the first month-over-month decline of the S&P Global Services PMI in 2023 (negatively affecting the S&P Global Composite PMI), a continuation of contraction in the manufacturing sector, and a slight decrease in the unemployment rate (from 3.7% in May 2023 to 3.6% in June 2023). Overall, the data has not proved recessionary yet. But with services slowing down, it would be appropriate to stay cautious and wait for more data to reveal underlying trends in the economy.
In our opinion, the current valuations for stocks seem overstretched (especially in the tech sector), and the replacement of fear and calls for a recession by the narrative dismissive of any danger to the U.S. economy could lead to a volatile concoction in the stock market. As a result, we are monitoring multiple technical indicators on a daily time frame, including RSI, MACD, and Stochastic. All three of these indicators show divergence with the price and point to the downside, which is not particularly bullish. In addition to that, SPX appears to be forming a double top, giving rise to an interesting setup if the pattern becomes valid.
Illustration 1.01
The picture above shows the mentioned setup. The bearish trigger becomes activated once the price breaks below Support 1.
Illustration 1.02
Illustration 1.02 shows nearly the perfect harmony between the decline from January 2022 until October 2022 and the rise from October 2022 until July 2022.
Technical analysis gauge
Daily time frame = Bullish (with signs of weakness)
Weekly time frame = Bullish
*The gauge does not necessarily indicate where the market will head. Instead, it reflects the constellation of RSI, MACD, Stochastic, DM+-, ADX, and moving averages.
Please feel free to express your ideas and thoughts in the comment section.
DISCLAIMER: This analysis is not intended to encourage any buying or selling of any particular securities. Furthermore, it should not be a basis for taking any trade action by an individual investor. Therefore, your own due diligence is highly advised before entering a trade.
In our opinion, the current valuations for stocks seem overstretched (especially in the tech sector), and the replacement of fear and calls for a recession by the narrative dismissive of any danger to the U.S. economy could lead to a volatile concoction in the stock market. As a result, we are monitoring multiple technical indicators on a daily time frame, including RSI, MACD, and Stochastic. All three of these indicators show divergence with the price and point to the downside, which is not particularly bullish. In addition to that, SPX appears to be forming a double top, giving rise to an interesting setup if the pattern becomes valid.
Illustration 1.01
Illustration 1.02
Technical analysis gauge
Daily time frame = Bullish (with signs of weakness)
Weekly time frame = Bullish
*The gauge does not necessarily indicate where the market will head. Instead, it reflects the constellation of RSI, MACD, Stochastic, DM+-, ADX, and moving averages.
Please feel free to express your ideas and thoughts in the comment section.
DISCLAIMER: This analysis is not intended to encourage any buying or selling of any particular securities. Furthermore, it should not be a basis for taking any trade action by an individual investor. Therefore, your own due diligence is highly advised before entering a trade.
Commento:
The breakout above Resistance 1 invalidated the formation of the double-top pattern. As a result, the bearish setup is no longer relevant.
