Trading Strategy: Finding Tops in the S&P 500 Index
by
Aleksandar Ivanovic
In trading, to fight against the trend is a hard thing, and the undergoing bullish trend in US stock market has been remarkable. But, every trend experiences a correction, with everybody now trying to find a top in S&P 500 Index. Are they on the right track?
We use technical analysis to find out which seems to be making a “call” for a top
For identifying a top in S&P500 Index I use technical analysis and its tools. First let us look at the monthly S&P500 Index chart (Chart 1) showing that the S&P500 Index has reached perfect Fibbonacci expansion level of 161.8% in a period 2007-2015, to around 2110 points from a low of 700. This 161.8% expansion occurred after a Fibbonnaci retracement of 61.8%, which was the stock market collapse of 2007-2009. We are seeing now the first evidence of a strong resistance here and maybe a top. Also if you look at RSI (13) indicator applied on chart you can see bearish divergence (Index is going up and RSI indicator is falling).
Chart 1. S&P500 INDEX MARCH 31, 2015 MONTHLY CHART
From a technical analysis and traders view things are getting clearer if we look at weekly Chart2. There is a bearish rising wedge formation and a falling top. Here we have a question for traders, who wants to be a buyer here?
Chart 2. S&P500 INDEX MARCH 31, 2015 DAILY CHART
I would say that traders have a clear picture and a near resolution of this situation. If S&P500 Index breaks 2110 points higher decisively then we could see a trend continuation. On the downside, break of the wedge would be confirmed by going bellow 2030 points.
Real breaking of this long term rising trend should come if S&P500 Index goes bellow 1920 points. Traders will closely watch this levels in the coming weeks and break of this wedge either top or a bottom of it would be a beginning of a huge move.
In trading, to fight against the trend is a hard thing, and the undergoing bullish trend in US stock market has been remarkable. But, every trend experiences a correction, with everybody now trying to find a top in S&P 500 Index. Are they on the right track?
We use technical analysis to find out which seems to be making a “call” for a top
For identifying a top in S&P500 Index I use technical analysis and its tools. First let us look at the monthly S&P500 Index chart (Chart 1) showing that the S&P500 Index has reached perfect Fibbonacci expansion level of 161.8% in a period 2007-2015, to around 2110 points from a low of 700. This 161.8% expansion occurred after a Fibbonnaci retracement of 61.8%, which was the stock market collapse of 2007-2009. We are seeing now the first evidence of a strong resistance here and maybe a top. Also if you look at RSI (13) indicator applied on chart you can see bearish divergence (Index is going up and RSI indicator is falling).
Chart 1. S&P500 INDEX MARCH 31, 2015 MONTHLY CHART
From a technical analysis and traders view things are getting clearer if we look at weekly Chart2. There is a bearish rising wedge formation and a falling top. Here we have a question for traders, who wants to be a buyer here?
Chart 2. S&P500 INDEX MARCH 31, 2015 DAILY CHART
I would say that traders have a clear picture and a near resolution of this situation. If S&P500 Index breaks 2110 points higher decisively then we could see a trend continuation. On the downside, break of the wedge would be confirmed by going bellow 2030 points.
Real breaking of this long term rising trend should come if S&P500 Index goes bellow 1920 points. Traders will closely watch this levels in the coming weeks and break of this wedge either top or a bottom of it would be a beginning of a huge move.
MSc Aleksandar Ivanovic is Licensed Portfolio manager. He is a financial markets and forex trader for more than 10 years. He is now Chief Strategist and a trader at his company own Quinotaur Ltd and also a founder of web presentation www.forextrening.com.
quinotaur.trading@gmail.com
MSc Aleksandar Ivanovic is Licensed Portfolio manager. He is a financial markets and forex trader for more than 10 years. He is now Chief Strategist and a trader at his company own Quinotaur Ltd and also a founder of web presentation www.forextrening.com.
quinotaur.trading@gmail.com
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Network, Learn, Grow | FMAS:24
Network, Learn, Grow | FMAS:24
Get ready to mark your calendars for FMAS:24, returning this May! Take a quick glimpse of what awaits at the Sandton Convention Centre in Sandton, South Africa from May 20-22, 2024.
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Get ready to mark your calendars for FMAS:24, returning this May! Take a quick glimpse of what awaits at the Sandton Convention Centre in Sandton, South Africa from May 20-22, 2024.
Don't miss out on this 5-second invite packed with energy and urgency!
Secure your free ticket now 🔗 https://events.financemagnates.com/yQx0l?utm_source=youtube&utm_campaign=fmas-is-back&utm_medium=video&RefId=FMAS24+Video+Ad+%5B1%5D
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Here's a sneak peek into the FMAS:24 vibrant atmosphere! Join us at Africa’s premium financial event for a transformative experience that combines the best of finance and technology.
From May 20-22, 2024, the Sandton Convention Centre in Sandton, South Africa, will be the hub for over 3,500 attendees to engage in unparalleled networking opportunities, learn from over 150 industry-leading speakers, and explore innovations from 120+ exhibitors.
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Here's a sneak peek into the FMAS:24 vibrant atmosphere! Join us at Africa’s premium financial event for a transformative experience that combines the best of finance and technology.
From May 20-22, 2024, the Sandton Convention Centre in Sandton, South Africa, will be the hub for over 3,500 attendees to engage in unparalleled networking opportunities, learn from over 150 industry-leading speakers, and explore innovations from 120+ exhibitors.
Secure your free ticket now 🔗 https://events.financemagnates.com/yQx0l?utm_source=youtube&utm_campaign=fmas-is-back&utm_medium=video&RefId=FMAS24+Video+Ad+%5B1%5D
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Join 3500+ Attendees at FMAS:24 | Africa's Premium Financial Event
Join 3500+ Attendees at FMAS:24 | Africa's Premium Financial Event
Looking to expand your network in #Africa? Join 3500+ attendees at FMAS:24, where online trading, fintech, payments, and crypto meet! Connect with industry leaders and innovators for an unmatched networking experience.
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Join 3500+ Attendees at FMAS:24 - Africa's Premium Financial Event
Join 3500+ Attendees at FMAS:24 - Africa's Premium Financial Event
Looking to expand your network in #Africa?
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Looking to expand your network in #Africa?
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Where the Prop Trading Industry Goes from Here | Finance Magnates Podcast
Where the Prop Trading Industry Goes from Here | Finance Magnates Podcast
Explore the tumultuous world of prop trading in this Finance Magnates podcast episode, featuring insights from Head of Axi Select, Greg Rubin.
We're discussing the challenges and shifts caused by MetaQuotes' pivotal decisions affecting MT4 and MT5 users, and how Axi Select offers a unique, realistic path to professional trading, steering clear of traditional prop firm pitfalls.
Tune in for expert analysis on the future of trading and innovative funding models.
The Axi Select programme is only available to clients of AxiTrader Limited. CFDs carry a high risk of investment loss. In our dealings with you, we will act as a principal counterparty to all of your positions. This content is not available for AU, NZ, EU and UK residents. For more information, refer to our Terms of Service. Standard trading fees apply.
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Explore the tumultuous world of prop trading in this Finance Magnates podcast episode, featuring insights from Head of Axi Select, Greg Rubin.
We're discussing the challenges and shifts caused by MetaQuotes' pivotal decisions affecting MT4 and MT5 users, and how Axi Select offers a unique, realistic path to professional trading, steering clear of traditional prop firm pitfalls.
Tune in for expert analysis on the future of trading and innovative funding models.
The Axi Select programme is only available to clients of AxiTrader Limited. CFDs carry a high risk of investment loss. In our dealings with you, we will act as a principal counterparty to all of your positions. This content is not available for AU, NZ, EU and UK residents. For more information, refer to our Terms of Service. Standard trading fees apply.
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