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News
Is Amazon a best-buy for the holidays?
News
China stocks end mixed despite PBoC announcement
News
Asia stocks rise on prospects of Fed easing hikes
News
HP joins the tech layoff spree
News
Will the euro give the bulls 200 reasons to smile?
News
Best Buy shares spike amid upbeat Q3 print

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Asset Watch

Is the S&P 500 near the bottom?

 

Tuesday, October 18 2022

The U.S. Consumer Price Index (CPI) came in hot on Oct. 13, turning Thursday’s epic reversal into a sharp sell-off on Friday. As investors become increasingly bearish and expect the S&P 500 to fall to 3,400 or below, could a counterintuitive rally materialise in the weeks ahead?
The S&P 500’s 200-week moving average is 3,599.29, and the index closed below the key level on Oct. 14. However, a similar milestone occurred for the week ending Sep. 30, and the S&P 500 has been flat ever since.
August and October 2020 saw weekly highs of roughly 3,588 and 3,550 in the same area, and a morsel of good news could have investors re-thinking their bearish bets.

Additionally, S&P 500’s weekly RSI also continues to make higher lows even as the S&P 500 makes lower lows. As a result, each sell-off is becoming less intense from a momentum perspective, and a diverging RSI is often a precursor to a reversal. Therefore, the technicals support a bounce in the weeks ahead.

Finally, a seasonality analysis by Goldman Sachs signals an S&P 500 bottom on Oct. 27. Historically, October tends to realise plenty of chops, where volatility reigns and the index stays range bound. Conversely, after Oct. 27, higher highs and higher lows often manifest until the end of the year.

Are the bears overplaying their hand or will 3,583 turn into 3,400 and then 3,000 in short order?


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