Just because the calendar changes dates doesn’t mean the market’s trends do. As such, now seems like a great time to update the S&P 500 roadmap many traders used throughout 2023. 🗺️
Below is a two-year daily candlestick chart with a few key indicators. The first is the 200-day moving average (blue), which traders use to track the long-term trend in the market. The next two are the anchored volume weighted average price (AVWAP) from the market’s 2022 highs and 2022 lows. Traders use this to track how the average buyer/seller has fared in the market from a specific date.
As shown below, all three indicators are rising, signaling an upward-trending market. It also indicates that the average buyer in the market is in the green, while the average seller is in the red on their positions. That also makes sense since the market is just below all-time highs, so clearly, buyers are doing better than sellers.
Moving on from the trend-following indicators, let’s look at some areas of potential support (where demand outweighs supply) and resistance (where supply outweighs demand).
The most apparent area traders are looking at for resistance is the 2022 high near 480. We approached that level last week and have pulled back, confirming that sellers remain near that level. As for support, traders are looking at the July highs near 460 as the first potential level. They suggest that prices must stay above that level to maintain their short-term momentum. Below that, the 200-day moving average near 435 could be another potential area of demand. ⚖️
Overall, technical analysts remain optimistic about the stock market’s conditions heading into the new year. Most trend indicators point to the upside, and momentum remains intact. One concern analysts do have is about breadth, with them wanting to see more stocks besides the “Magnificent Seven” driving the market’s gains. We began to see that late last year with the small-cap Russell 2000 index establishing its own upward trend, but analysts want to see that strength continue.
We’ll have to see if their current forecast holds up. Last year’s theme was a soft landing, but this year’s risks remain unknown as Wall Street’s consensus expects strong earnings growth, no recession, and looser financial conditions. 🤷