Nine Reasons Why the S&P500 Should Continue to Rally

My preferred method of analyzing the S&P500 (SPX) and other indexes is the Elliott Wave Principle (EWP). Still, its application must coincide with classic technical analyses (TA) to determine the most likely EWP option. Otherwise, one literarily is slapping on wave labels in a vacuum.

S&P 500 Technical Comparison With 2021 Rally

Although “past performance is no guarantee for future results,” as is often disclaimed, in this update, I will look at nine (!) different TA items to see if -as Mark Twain once said- “History Doesn’t Repeat Itself, but It Often Rhymes.” See figure 1 below.

Figure 1. S&P500 daily candlestick charts with several technical indicators and moving averages

The analogy with November 2021 suggests higher prices are ahead.

Since the SPX has now rallied almost 500 points since the February 24 low, I compare the current rally with the one that started in October 2021 and lasted until December 2021. I have numbered similarities between then and now in the Tas with numbers. This method allows for an objective assessment of the price chart:

1. The Bollinger Bands first expanded (black arrows), then the lower band bottoms bottomed, followed by a move back up, as does the index.
2. The index is above the (red) 200-day simple moving average (SMA)
3. The index is above the Ichimoku Cloud
4. The index is above the (blue) 50-day SMA
5. The index is above the (green, dotted) 20-day SMA
6. The index dipped briefly and then rallied again
7. The RSI5 fell shortly, but not below 50.
8. The MACD dipped briefly, its histogram topped, but it remained firmly pointing higher
9. The Money Flow Indicator (MFI14) stayed at around 70.

US Stock Market Technical Forecast

The S&P500 has rallied over 500 points since the infamous February 24 low. An objective analysis of the most recent rally (October-December 2021) shows there are (at least) nine similarities between then and now. Back then, the rally took a brief pause before adding ~4.5%, after which a more significant correction (-5.3%) happened.

The index took a quick break in the middle of last week and has already started to rally again. Similar to the Oct-Dec. ’21 rally. Based on these nine similar TA setups, odds favor the current rally should reach new uptrend highs (think SPX4750+/-50) before a more significant correction (think back to ~SPX4350+/-50) should ensue.