The SPX500 is trading more than 20% from its October low. It is generally considered that a 20% increase off a recent low suggests a bull market, whilst a 20% decline connotes a bear market. This definition may be considered loose, and filters need to be applied so that whipsaws do not continuously swing it between bull and bear market. E.g., typically, another 10% move in the opposite direction is required to change the status.
A better measure of a bear or bull market is trend determination on a primary trend level. In this regard, the SPX500 has charted a series of higher troughs followed by higher peaks. Recently higher peak, HP2 was charted and validated higher trough, HT2 on the weekly chart i.e., the SPX500 is in a primary uptrend.
We have also applied indicators as trend filters:
- The SPX500's candlesticks are trading above the black 34-week EMA and, importantly, the EMA is pointing upwards.
- The index's RSI is above 50 (green rectangle), which is the bullish side of the oscillator.
Price does not move in a straight line. There will be ebbs and flows, and the market will move as a series of impulse waves and corrective waves. A pullback from current levels will not necessarily change the trend. As long as the next pullback charts a higher trough, the uptrend remains intact. Moreover, if that higher trough is then validated by a higher peak, the uptrend will be continuing higher.
The SPX500 was boosted yesterday after initial jobless claims rose, reinforcing expectations that the Federal Reserve will pause when it meets next week.
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.