SP500 – Weekly Analysis
Yesterday, the S&P 500 may have hit a bottom. Today, it recorded several signals that we cannot ignore. We usually wrap our weekly series with SPX, but today’s close was far too important to wait until Sunday.
In this weekly SPX analysis, we review the latest candle and momentum signals, examine the sector split beneath the headline index, and outline the mid-term potential map for the S&P 500.
CANDLES & TA
Two weeks ago, I warned about a possible sharp pullback after nine consecutive green weekly candles. The last two weeks delivered exactly that. While this week’s candle did not touch the 20 EMA, it came very close and immediately bounced above the major 8 EMA support.
I believe last week’s red candle had more meaning than a regular bearish candle. It was not only a Bearish Engulfing, which signals a high probability of at least one more week in the same direction. It was also a Three-Line Strike, a fairly rare bullish combination: the red candle opens above the close of the third green candle and closes below the open of the first one. If this interpretation is correct, it did a great deal to reset technicals and interrupt the nine-candle combo. Now the index can potentially start another stretch higher.
The 1D and 2D frames turned constructive. The daily frame formed a strong Bullish Engulfing on Thursday, and the reversal was technically confirmed today. The daily also closed above both the 8 and 20 EMA support. The 2D frame formed a Bullish Harami, with fair chances of confirmation over the next two sessions. Momentum has started shifting upward.
Overall, the index is bullish short-term. The mid-term outlook is neutral for now, as we still need confirmation of the potential weekly reversal and the 2-day momentum.
Elliott Waves
On Thursday, I suggested a possible bottom and the end of the entire wave (2), however short, but still within reasonable boundaries for a market in a hurry. If this hypothesis is confirmed next week, we may witness a spectacular rally in wave (3), potentially adding 15–20% into summer or early fall.
For this to happen, SPX must pass a test. It needs to develop an impulse off the June 11 lows, approximately as shown on the chart below. Ideally, wave (iii) in green should stretch above the current ATH. In that case, the probability of the red count would be greatly reduced.
SP500 Sectors
A quiet shift happened under the hood.
Most importantly, Technology, with a weight of roughly 34%, confirmed a daily bottom and is back on the bullish track. Financials, about 13%, formed a solid bullish continuation candle and recorded an 8/20-week EMA bullish cross. Communication Services formed a Bullish Engulfing on the 2D frame, although the weekly frame is still undecided.
Overall, among sectors, only Consumer Discretionary remains bearish, while Energy is neutral. All others are bullish, though with varying degrees of strength.
SUMMARY
The S&P 500 may have completed a sharp but technically reasonable wave (2) pullback after nine consecutive green weekly candles. Last week’s red candle likely served as both a Bearish Engulfing and a rare Three-Line Strike, helping reset overextended technicals and interrupt the prior nine-candle advance.
The short-term picture has improved meaningfully. The daily Bullish Engulfing from Thursday was technically confirmed, the index closed back above the 8 and 20 EMA support, and the 2D frame formed a Bullish Harami with fair chances of confirmation early next week. Momentum has started shifting upward.
From an Elliott Wave perspective, the key test is whether SPX can develop a clean impulse off the June 11 lows. If wave (iii) in green stretches above the current ATH, the probability of the red bearish count would be greatly reduced. In that case, wave (3) could drive a spectacular rally of roughly 15–20% into summer or early fall.
The sector picture also quietly improved. Technology confirmed a daily bottom and returned to a bullish track, Financials formed a strong bullish continuation candle and recorded an 8/20-week EMA bullish cross, and Communication Services printed a 2D Bullish Engulfing. Only Consumer Discretionary remains bearish, while Energy is neutral; all other sectors are bullish with varying strength.
Overall, SPX is bullish short-term. The mid-term outlook is neutral for now, pending confirmation of the weekly reversal and the developing impulse off the June 11 lows.
