S&P 500: The Underlying Trend Remains BullishLast week, the S&P 500 index entered a consolidation phase amid a packed fundamental calendar. The Fed’s monetary decision, PCE inflation, the NFP report, and trade negotiations all triggered short-term profit-taking. However, this consolidation has remained technically well-structured, with key supports intact, and the broader trend remains bullish.
Let’s conduct a technical assessment as this week unfolds under geopolitical pressure, with the Friday, August 8 ultimatum set for Russia.
1. The underlying trend in the S&P 500 remains bullish above the major support at 6050/6150 points
Let’s first examine the different timeframes for the S&P 500 futures contract. The triptych below shows monthly, weekly, and daily candlesticks. All three timeframes send the same message: the underlying trend in the S&P 500 remains bullish as long as the major support at 6050/6150 points holds on a weekly closing basis. This support zone corresponds to the former all-time high from last winter. In the short term, a retest of the support cannot be ruled out before the trend resumes.
2. Quantitative analysis does not show an overbought situation, with the percentage of stocks above the 50-day moving average still below extreme levels
Last week’s consolidation helped deflate a potential overbought condition. The percentage of S&P 500 stocks trading above their 50-day moving average was approaching an overbought zone, but is now back to 50%, giving the index renewed capacity to resume its bullish trend.
3. The Dow Jones is in an accumulation phase below its all-time high
The Dow Jones also shows a promising technical setup, potentially forming a bullish continuation inverse head-and-shoulders pattern. A breakout above the 45,000-point resistance is needed to confirm this signal. The equal-weighted S&P 500 index shows a similar technical structure.
4. Retail investor sentiment is still far from euphoric extremes
Market tops are always built in euphoria, especially among retail traders. According to the latest data from the American Association of Individual Investors (AAII), buying interest has increased and is slightly above the historical average, but still far from its typical overheating zone. This sentiment indicator confirms that the underlying trend in the S&P 500 remains bullish above the 6050/6150-point support (based on S&P 500 futures).
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