If history could somehow predict the future, what is your take on the S&P 500 weekly chart and the Parabolic SAR indicator below?
Based on the past uptrend Parabolic SAR counts, a correction, big or small, becomes imminent when the count is near 20. Maybe within the next week or two, we'll see some kind of correction. Is it time to take profit and wait for a better entry point?
I was looking at the S&P 500 monthly return chart. It used to be the 5%+ monthly return occurred after a a big dip in the previous month. However, we have had 4 over 5% monthly return in 2020. We could exclude the April one because there were 2 sharp drops prior. That still leaves us three, especially in November, 2020, it registered a whopping 10.75%. I know. Nasdaq went up 40%. Tesla went through the roof.
The Parabolic SAR will probably sit at 3850 tomorrow. It's getting close. Today's low was 3885. Will S&P 500 drop 63 points tomorrow? It's doubtful, considering there is really no bad news out there. The sentiment remains bullish and complacent.
I also want to share a few Fibonacci extension levels charts.
The first one does not look quite right, does it? I set the first wave up, high on 3/31/2021, retracement low on 4/1/2021. It did predicts correctly on a few highs and lows, but not quite there.
The second chart looks much better. I set the first wave high on 4/29/2021 and the retracement low on 5/14/2021. However, it predicts the 161.8% high at 3884. Now, the index is above that level, and 3884 does provide some support.
I applied the Parabolic SAR on the S&P 500 daily chart today. It looked quite similar to the times from January, 2020 to February 19, 2020. Based on the patterns from the past few years, when Parabolic SAR turns green, the index rises between 100 and 300 points. Each period lasts from 10 to 25 trading days before some sort of correction takes over, which can be minor or major.
The last time it turned green at 3836 on 2/4/2021. It climbed as high as 114 points. Today, S&P 500 was on the 9th green-dot up-trend day. What if...
Out of curiosity, I was thinking if Excel could forecast the stock market. We know Excel's Forecast is a function of making predictions by using the historical data and analyzing trends. Can the S&P 500 historical data shed some light on the future? Maybe or maybe not. I would like to think so because the price movement follows a pattern - when it gets too expensive, the price comes down, or vice versa. The equilibrium price is the price that buyers and sellers agree. Timing is something we can not predict.
I took the S&P 500 monthly closes from Yahoo Finance from 3/1/2010 to 2/12/2021 and put them in Excel. Here's what Excel forecasts.
Ignore the timing factor even though it predicts an immediate sharp pullback of the S&P 500. However, the long term outlook still looks rosy.
The bigger question is whether S&P keeps going up from this point and then starts a major correction later this year or next year, or is a major correction imminent?
In the 2-year chart of the comparison between the S&P 500 index and the U.S. Dollar index below, one could easily spot one thing - when one goes up, the other goes down - except that one followed the other between 1/31/2020 and 3/9/2020.
After the U.S. Dollar index was unable to break through 102.99, the trend reversed. The Almighty Dollar continue to weaken until it set the low of 89.2 on 1/6/2021 before it reversed its course. The S&P 500 index, however, continued to move higher and closed at the record high of 3886. For the past month, both indexes have been moving in the same direction, which is closely resembling the pattern between 1/31/2020 and 2/20/2020.
Based on what we see in the chart below, can we assume S&P 500 is near the top so maybe it's time to take the profit?
Yesterday, I did a February projection on the S&P 500 - between 3862, a 4% gain from the January close, and 3899, a 5% gain from the January close. Today, the index hit the high of 3894 before it closed at 3886. The 5% projection is based on the historical norm. Maybe we'll begin to see the index consolidating between 3788 and 3899, which is still between 2% and 5% gain from the January close.
Today, I looked at the S&P 500 long-term weekly chart. I found something quite interesting. As you could see the calculation in the chart below, back on 10/8/2007, the index hit the high of 1576. 1576 x 1.382 gives us the first projected high of 2178. The index hit 2134 on 5/18/2015. The error was 44 points.
2134 x 1.382 gives us the 2nd projected high of 2949. The index hit 2940 on 9/17/2018. This time, the error was merely 9 points.
2940 x 1.382 gives us the 3rd projected high of 4063. The index is only 177 points, or 4.6%, away from today's close, 3886. Will we have another surprise like the one we had in November, 2020, in which the index rose 11%? I think the index may come near the projected high of 4063 in March or April.
