Week of July 31 - August 3
Takeaways:
• SPX does not appear to be over-extended in the longer timeframe.
• Price action this year has oddly close seasonal characteristics to 2019 when compared.
• Short term price action indicates more selling is possible.
The SPX is Not Appearing Overbought
One method to look at whether a equity is overbought or oversold is to look at the long term moving averages. In this case we see peak highs in the SPX and its distance from the 200ma.
At 15% the current market is hardly showing overbought long term in context with the previous measurements.
Market Breadth is still indicating a bullish bias. With 62% of stock still above their 50MA
From a seasonal perspective, the 2023 SPX has a very similar cadence to 2019.
• Strong start to January almost identical to 2019
• Then a 4 month divergence
• Another almost identical 2 month uptrend to end up nearly 22% starting in June.
• August looks to be starting very similar as well.
Short term, intra-week, the SPY broke below the previous day's intra-day low.
• Typically this price action sets up for lower price discovery.
• Friday was characterized by a strong morning then a sharp high volume selloff second half of the day.
Another interesting technical feature was there have been only two other times since March where the SPX ticked below 1500. In the few occurrences this year, it has been followed by and uptrend. It is a possible signal of capitulation.