My conversations with Chris Verrone, Adrian Zduńczyk, and Mary Ellen McGonagle this week on The Remaining Bar left me striving to simplify my evaluation of the S&P 500.

It has been a complicated time for shares and in consequence, my most important each day chart of the S&P 500 has change into a lot busier. I’ve discovered that, the extra I am drawing traces on a chart, the much less clear the path of the development.

I stand by the worth of all the things proven on that chart, however I undoubtedly would say that it might be useful to take a contemporary look with a lot much less complexity! So in an effort to simplify, I’ve began contemporary with a close-only chart of the S&P, together with the 200-day transferring averages.

First off, that is approach much less busy. And in some ways, it is offers a a lot clearer illustration of the bull case for shares. It additionally exhibits what would make that bull case not legitimate.

After we break down the S&P 500 chart to its easiest type, we see a transparent transition from the bull part of 2021 to the bear part of 2022. And what tells us that the transition occurred? We had a transparent decrease excessive in March 2022 after the height in January 2022. The SPX first broke the 200-day transferring common in January, however then lastly continued decrease in April. And, by early Might, we might clearly see the slope of the 200-day transferring common had rotated from constructive to detrimental.

Now concentrate on the final three months, when the SPX principally skilled the exact opposite set of situations. We made a better low in December after the brand new 52-week low in October. The S&P lastly pushed above the 200-day transferring common in January, and we will now see that the 200-day transferring common has flattened out.

Here is one other chart which incorporates trendlines to higher outline the bullish and bearish phases.

What does the bull case for shares seem like from a technical perspective?

We’d see greater highs and better lows, together with an upward-sloping 200-day transferring common. And because the market would transfer onward and ever upward, we would search for a return of the bearish sample we noticed in early 2022. Simply because the bearish trendline was so useful in confirming of the 2022 bearish market part, the trendline connecting latest lows could possibly be one of the simplest ways to find out when the upward transfer was exhausted.

Here is the kicker. What would we have to see within the subsequent week or two to counsel that the bull case was not engaged? I’d say {that a} break beneath the 200-day transferring common, together with a break beneath trendline assist, would persuade me to show fairly defensive. And that signifies that, for now, SPX 3940 is the extent that should maintain!

Earlier than you go, take a look at my newest video, which exhibits why momentum investing tells you to seek for energy in shares!

RR#6,

Dave

P.S. Able to improve your funding course of? Take a look at my free behavioral investing course!

David Keller, CMT

Chief Market Strategist

StockCharts.com

Disclaimer: This weblog is for instructional functions solely and shouldn’t be construed as monetary recommendation. The concepts and methods ought to by no means be used with out first assessing your personal private and monetary scenario, or with out consulting a monetary skilled.

The writer doesn’t have a place in talked about securities on the time of publication. Any opinions expressed herein are solely these of the writer and don’t in any approach symbolize the views or opinions of some other particular person or entity.