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S&P 500: Striking Similarity To September Last Year

By Sunshine Profits (Paul Rejczak)Stock MarketsSep 15, 2021 10:52AM ET
www.investing.com/analysis/sp-500-striking-similarity-to-september-last-year-200602041
S&P 500: Striking Similarity To September Last Year
By Sunshine Profits (Paul Rejczak)   |  Sep 15, 2021 10:52AM ET
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Stocks extended their short-term downtrend as the S&P 500 index fell slightly below its Monday’s daily low. Is more downside trading action coming?

The broad stock market index fell to the daily low of 4,435.46 on Tuesday and it was the lowest since Aug. 20. On Sept. 2, the index reached a new record high of 4,545.85. Since then it has lost over 110 points. This morning stocks are expected to open virtually flat.

The index remains elevated after the recent run-up, so we may see some more profound profit-taking action at some point.

The nearest important support level of the broad stock market index is at 4,435 and the next support level is at 4,400-4,410. On the other hand, the nearest important resistance level is now at 4,465-4.475, marked by the recent support level. The S&P 500 got back close to its over four-month-long upward trend line, as we can see on the daily chart (chart by courtesy of http://stockcharts.com):

S&P 500 Daily Chart.
S&P 500 Daily Chart.

Dow Jones – Short-term Consolidation

Let’s take a look at the Dow Jones Industrial Average chart. The blue-chip index broke below a potential two-month-long rising wedge downward reversal pattern last week. It remained relatively weaker, as it didn’t reach a new record high like the S&P 500 and the NASDAQ Composite. The support level is now at around 34,500 and the near resistance level is at 34,750, marked by the recent support level, as we can see on the daily chart:

Dow Jones Daily Chart.
Dow Jones Daily Chart.

September Last Year – S&P 500 Fell Almost 11%

In 2020, the S&P 500 index reached a local high of 3,588.11 on Sept. 2 and in just three weeks it fell 10.6% to local low of 3,209.45 on Sept. 24. This year, September’s downward correction has started at the new record high of 4,545.85 on Sept. 3, so there is a striking similarity between those two trading actions. However, the index is just 2.4% down this time.

S&P 500 Daily Chart.
S&P 500 Daily Chart.

Apple (NASDAQ:AAPL) Stock at Trend Line

Apple stock weighs around 6.3% in the S&P 500 index, so it is important for the whole broad stock market picture. Last week it reached a new record high of $157.26. Since then it has been declining. So it looks like a bull trap trading action. On Friday, the stock accelerated its downtrend following an unfavorable federal judge's ruling. We can still see negative technical divergences between the price and indicators and a potential topping pattern. The two-month-long upward trend line remains at around $147.

Apple Daily Chart.
Apple Daily Chart.

Conclusion

Yesterday, the S&P 500 index extended its short-term downtrend following breaking below 4,500 level on Friday. For now, it still looks like a correction within an uptrend. Today we will most likely see a flat opening of the trading session – we may see some more short-term consolidation.

The market seems overbought, and we may see some more profound downward correction soon. Therefore, we think that the short position is justified from the risk/reward perspective.

Here’s the breakdown:

  • The market retraced more of its recent advances this week, as the S&P 500 index extended its decline below 4,450 level.
  • Our speculative short position is still justified from the risk/reward perspective.
  • We are expecting a 5% or bigger correction from the record high.
S&P 500: Striking Similarity To September Last Year
 

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S&P 500: Striking Similarity To September Last Year

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Comments (2)
American Truth
American Truth Sep 16, 2021 12:29AM ET
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next time, flip a coin.
Vi Ma
Vi Ma Sep 15, 2021 11:31PM ET
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Agree .... but since this liquidity guys has ignore al fundamentals and tech charts of the mkt Wizard's, one is sceptical until sees it. 20% correction it should be, for stock to rally into the year end and gain 30%+ post this correction.
 
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