S&P500 Huge confirmation of our bull pattern repeat.


Right on the October 13 2022 low, when the CPI number came out higher than expected and the market was in extreme fear mode, we posted the following idea on the S&P500 index (SPX), explaining how fundamentally the report was still lower than the previous month and more importantly how technically the index was flashing some early signs that it would repeat the previous two rebounds on the Megaphone’s Lower Lows on February 24 and June 17:

S&P500 CPI higher than expected. Can it repeat this bullpattern?

As you see, our expectation is so far being materialized as 10 days later, the index hasn’t just avoided making a Lower Low going against the majority’s belief on the CPI but also rebounded on the exact same day and is testing the October 05 High/ Resistance. This time we will see this in more detail, focusing on the 1D RSI.

As you see, when the RSI broke above its Lower Highs trend-line, the rebound basically started and on both previous sequences, it was as early as anyone could get. This time (October 14), it appears to be even earlier. The 1D MA50 (blue trend-line) is just above and if the current Lower High leg follows the previous two, then it should break rather fast and target just above the 0.618 Fibonacci retracement level, which as you see is where the 1D MA200 (orange trend-line) is headed. This trend-line is critical as it was exactly where the August 16 Lower High was made and the price was rejected, so right now is the most important long-term Resistance.

As with the previous analysis, we have plotted all Lower Low/ Lower High sequences on top of each other with Blue being January – March, Orange April – August and Grey August to October (now). It is evident that all are very similar and compared to the previous ones, the current S&P500 levels constitute still a good buy opportunity, at least on the medium-term. For the long-term, the price has to break above the Bearish Megaphone’s top (Lower Highs trend-line), which is the pattern that has been dictating the 2022 Bear Cycle so far.

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