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Chart Of The Day: More Losses On The Way For The S&P

By Fawad RazaqzadaStock MarketsJan 28, 2022 09:07AM ET
www.investing.com/analysis/chart-of-the-day-more-losses-on-the-way-for-sp-200616295
Chart Of The Day: More Losses On The Way For The S&P
By Fawad Razaqzada   |  Jan 28, 2022 09:07AM ET
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This article was written exclusively for Investing.com

The S&P 500 still looks quite heavy, and more losses could be on the way despite Apple's (NASDAQ:AAPL) positive earnings results. 

Technology stocks in particular continue to weigh heavily on the major US indices as rising expectations over multiple interest rate hikes from the Fed undermine the appetite for expensive growth stocks. With the weekend approaching, there may be bouts of short-covering here and there, but ultimately the ongoing trend is bearish. Thus, any potential rallies are likely to be short-lived until something changes fundamentally.

Indeed, the S&P 500 has failed to show any further bullish price action after forming that hammer on the daily chart on Monday:

S&P Daily
S&P Daily

If that hammer candle marked the low point for the market, then, surely, we should have seen some upside follow-through by now. But this late in the week and we are residing in the lower half of Monday’s range. This points to a market that lacks bullish conviction—and rightly so.

So, in my opinion, it appears as though the bulls are still the trapped group of investors, and their stops are at risk of being taken—possibly later today.

Therefore, a drop to at least below Monday’s low at 4222 looks quite likely now. If there’s acceptance below that level, then the bears might want to target the Fibonacci extension levels shown on the chart. 

The first important Fibonacci extension levels of 127.2% and 161.8%, derived from this week’s current range, come in at 4160 and 4080. The same Fibonacci ratios from the October-January upswing come in at 4132 and 3945, respectively. 

As far as the bulls are concerned, well they will need to see a rally above Monday’s high in order to tip the balance back in their favour. Should this happen, the S&P will have also reclaimed the 200-day moving average. Only then will the bearish outlook become weak. 

But until and unless that happens, or we find a more significant bottoming pattern at lower levels, the path of least resistance remains to the downside. As such, I would continue to look to sell into any short-term rallies at resistance, than buy the dips back to support. 

Chart Of The Day: More Losses On The Way For The S&P
 

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Chart Of The Day: More Losses On The Way For The S&P

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Comments (5)
Nick Harrell
Nick Harrell Jan 31, 2022 10:37AM ET
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Point of the matter is that all forms of market analysis (fundamental, technical or quantitative) require a certain amount of subjectivity.  We should take care when we criticize someone else’s market analysis, because someone else can come right behind and criticize yours. For those who think technical analysis is useless “garbage”, then don’t use it.  One’s approach to market analysis is like their choice in politics or religion, it is often a matter of personal psychology.  There is no approach that works 100% of the time. There are many “roads to Rome”.  Ultimately, the best decisions come from using a combination of analytical approaches.
Nick Harrell
Nick Harrell Jan 31, 2022 10:36AM ET
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As has been said often by many, technical analysis is more of a windsock than a crystal ball. Analysis can be bias towards the personal desires and wishes of the analyst.  You see what you want to see.  Time frames are also important. Is the analysis proffered for a short, intermediate or longer term trade/investment. Not everybody uses the the same indicator settings (i.e. a 300 day moving average) I only see one “inside day” following the hammer that was put in on Monday and it was a “high wave” candle Inside days and high wave candles indicate indecision, confusion, consolidation.  Trend reversal, maybe or maybe not We had 3 lower closes following Monday’s hammer and the volume on Friday’s bullish was not very constructive.  In fact it was lower than the volume of the 4 preceding days. I could suggest that what we are likely to see is a “ bounce” off of an over sold condition, followed by a further sell-off.
Chase Flores
Chase Flores Jan 28, 2022 6:16PM ET
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🤣🤣🤣🤣 this aged well. More downside on the way huh? Charting isn’t your strong suit. Avoid it, not a good look to be completely wrong after 7 hours. That giant lower wick off the 300 MA Monday followed by 3 inside candles should have told you everything you needed to know. Multiple inside bars indicate consolidation or trend reversal. Friday’s close above mondays range confirms a trend reversal. Why would you publish this article with such a bearish bs headline at 6 AM?
nitin chugh
nitin chugh Jan 28, 2022 11:52AM ET
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see the unseen.... what u see .... everyone sees...... what they see you don't see 🙈
Rick Williams
Rick Williams Jan 28, 2022 10:26AM ET
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Charting is garbage. Too much cash on the sidelines and people plowing money into their 401k will never stop the Bull.
 
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