A week into November and the SPX500 is already up over 4% for the month. The index is currently near 4,360 but a close above 4,400 (green horizontal line) will be regarded as a bullish development. The SPX500 has pulled back over the last three months and a close above 4,400 will complete a bullish reference candle reversal:
1. Last month's candle is the reference candle (blue arrow), with the lowest low in at least a three-candle cluster.
2. The candles on either side have higher lows than the reference candle.
3. A close above the reference candles high (green horizontal line) will complete the pattern.
The green 5-month EMA is looking to pull aways from the orange 10-month. This is a sign of a momentum build-up. In this regard, the monthly RSI has remained above 50 (green rectangle), which is the bullish side of the indicator. The longer it maintains on the bullish side, the greater the probability that the bullish reference candle reversal will be completed on the monthly chart.
However, to aid the bullish case there needs to be broader participation by constituents and bank stocks will need to perform. There has been lag here over the course of recent months, but positive signs are emerging. The equal weighted S&P 500 ETF (RSP) has found support and is attempting to move higher. Moreover, FXCM's US.BANKS stock basket appreciated by over 8.5% last week in an attempt to overcome its 30-week EMA. Whilst not definitive, these signs do bode well for the broader SPX500 and need to be monitored for further progress.
Senior Market Specialist
Russell Shor joined FXCM in October 2017 as a Senior Market Specialist. He is a certified FMVA® and has an Honours Degree in Economics from the University of South Africa. Russell is a full member of the Society of Technical Analysts in the United Kingdom. With over 20 years of financial markets experience, his analysis is of a high standard and quality.