S&P 500 Index - Buy or Sell?
Dear readers,
Welcome back to our free newsletter, where we discuss investable assets by their history, current and future outlook with technical analysis.
In this newsletter we are turning back to the most important U.S. Index, the S&P 500, to see why it is rising and how to act based on that information.
S&P 500 (future)
The S&P 500 index is as of writing trading around $3970 and is up almost 10% from its low from June. But why is the index going up even though most articles say the chances of a recession are high? We think that investors believe that the worst is over for the stock market and are not keeping in mind about how the new Federal Reserve policy will impact companies and their earnings later this year.
The current Q2 earnings season is already saying enough, most companies have worse then expectations second quarters.
While the price looks to perform bullish by making higher highs, we are still cautious because of the developing Bear Flag Pattern we are currently seeing.
*Bear Flag Pattern stands for a consolidation period in a downtrend, when the price falls below the lower blue line (support) a new downtrend usually begins with the same kind of drop as its pole (fat blue line before flag).
We expect trading volume to fall until the price breaks through either side of the flag. We say either side because all patterns can break towards the non-preferred side, but it occurs less often.
Our strategy is to wait for a breakout in either direction and act based upon that outcome:
Long positions if the price breaks above
Short positions if the price breaks below
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