Experimental: SPX due for significant correction?
تم تحديثه
I am experimenting with TA on stocks and market indices. I think it is much less reliable than crypto due to closer links to external/macro factors.
In my opinion SPX is significantly overbought. On 2nd Sept we reached a 4H RSI of 88 and 1D RSI of 84 - we've only seen SPX this overbought in the last 20 years on one occasion, on 26th Jan 2018. On that occasion we saw an initial correction of 12%, followed by a recovery to new all time highs that built RSI divergence and triggered a bigger correction of 20%.
Today, since that RSI peak, we have already had a small correction of 10.5% and recovered to new all time highs and built a strong RSI divergence up against a descending RSI resistance line. We could break this line in the next days and invalidate, but if we confirm another high on the resistance line right here it solidifies the picture. We have RSI divergence on all timescales from 1H to 1 Month.
We are also in a small ascending wedge within a bigger ascending wedge. If we head down, on the RSI we can then complete a descending wedge and be ready for the next bull move in mid 2021. Note that it's possible for us to retrace within the wedge and still make at least one more high before breaking down. That high could be up to 3750, so some upside on the current value but not much.
In terms of price targets for the correction, somewhere between the 0.5 fib (2930) and golden pocket (down to 2710) would make sense. The 0.5 fib would also be exactly a 20% correction from the current price level, which could mirror the prior occurrence of such an extremely overbought condition on the 1D (although of course, it doesn't have to mirror it).
Timing could be anywhere in the first 6 months of 2021.
For information only. Lets see if this turns out to be a valid analysis.
In my opinion SPX is significantly overbought. On 2nd Sept we reached a 4H RSI of 88 and 1D RSI of 84 - we've only seen SPX this overbought in the last 20 years on one occasion, on 26th Jan 2018. On that occasion we saw an initial correction of 12%, followed by a recovery to new all time highs that built RSI divergence and triggered a bigger correction of 20%.
Today, since that RSI peak, we have already had a small correction of 10.5% and recovered to new all time highs and built a strong RSI divergence up against a descending RSI resistance line. We could break this line in the next days and invalidate, but if we confirm another high on the resistance line right here it solidifies the picture. We have RSI divergence on all timescales from 1H to 1 Month.
We are also in a small ascending wedge within a bigger ascending wedge. If we head down, on the RSI we can then complete a descending wedge and be ready for the next bull move in mid 2021. Note that it's possible for us to retrace within the wedge and still make at least one more high before breaking down. That high could be up to 3750, so some upside on the current value but not much.
In terms of price targets for the correction, somewhere between the 0.5 fib (2930) and golden pocket (down to 2710) would make sense. The 0.5 fib would also be exactly a 20% correction from the current price level, which could mirror the prior occurrence of such an extremely overbought condition on the 1D (although of course, it doesn't have to mirror it).
Timing could be anywhere in the first 6 months of 2021.
For information only. Lets see if this turns out to be a valid analysis.
ملاحظة
Note that rising above the upper resistance line doesn't necessarily invalidate the idea here. Overthrow above the line on the last resistance test often signals the top of a rising wedge. I think that even going to the 3800 area does not invalidate here. However it will start to erode some of the RSI divergence argument, but technically that's still valid if the 4H RSI remains below 88 and the 1D below 84. Currently we are approaching 68 on both timescales so there is plenty of headroom for overthrow in this pattern.t3live.files.wordpress.com/2008/06/xlebearsihrisingwedge6-4-08.jpg
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