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Asset Watch
Thursday July 11, 2024
The index’s momentum has slowed on the weekly chart. While the S&P 500 makes higher highs, its weekly RSI has made lower highs. The same development occurred in early 2020 and late 2021 (marked by the vertical white lines), as the RSI descended in advance of the index. While 2020 and 2022-style bear markets are highly unlikely, a correction could be in the cards.
Providing the perfect support combination, the index retested and confirmed the breakout above the March 2024 highs near 5,265. Likewise, a pullback to this area is aided by the 20-week moving average, which currently sits near 5,267. The S&P 500 bounced off the 20-week MA in April 2024, making it an important level to watch. As such, if volatility strikes, this could be a nice zone to play for a bounce.
If not, and the rally continues uninterrupted, look to the 5-week MA for momentum clues. The index only closed below the metric once from late October 2023 until early April 2024, which makes a long position justified when it holds.
So, is caution warranted after such a strong run, or will the wall of worry push the S&P 500 even higher?
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