Hi Traders! SP500 short term forecast update and follow up is here. On February 17th I shared this “Technical Analysis – SP500 Short Term Forecast” post in our blog. In this post, let’s do a recap of this setup and see how it has developed now. If you would like to learn more about the way we trade and the technical analysis we use then check out the Traders Academy Club. Spoiler alert – free memberships are available!
My Idea
On the H4 chart, the price which was moving higher has created a bearish divergence between the first high that has formed on 2nd February 2022 and the second high that has formed on 9th February 2022 based on the MACD indicator. The price then moved lower and broke below the last low that has formed on 4th February 2022 creating lower lows, thus forming a classical setup of bearish divergence followed by bearish convergence, we may consider these as evidences of bearish pressure. Generally, after a bearish convergence we may look for corrections and then further continuation lower. Currently, it looks like a pullback is happening. Until the strong resistance zone (marked in red) shown in the image below holds my short term view remains bearish here and I expect the price to move lower further.
SP500 H4(4 Hours) Chart Current Scenario
Based on the above-mentioned analysis, on the H4 chart, my view was bearish and I was expecting the price to move lower further until the strong resistance zone holds. The price action followed my analysis exactly as I expected it to here. After the bearish convergence the pullback that I was looking for happened and then the price moved lower further delivering an excellent move to downside!
On the H1 chart, the market provided us with various facts supporting the bearish view. The price which was moving higher created a bearish divergence between the first high that has formed at 4474.53 and the second high that has formed at 4490.39 based on the MACD indicator, which we may consider as evidence of bearish pressure. The price then moved lower and broke below the most recent uptrend line. We may consider these as facts provided by the market supporting the bearish view and also there we no signs opposing this bearish view. Then as you can see in the image below how the price moved lower further and provided an excellent move to the downside.
(Note: You can learn about a Killer Forex Strategy “Double Trend Line Principle” here)
As traders we always have two choices, the first one is to fall in love with our analysis and try to convince the market and expect the price to move in the direction as per our wish. The second one is to follow the facts that the market provides us and make the right actions according to that. As you know the first option won’t help us and as you can see in the example above what happened when we followed the facts that the market hinted to us and took the right action accordingly.
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If you have any further questions, don’t hesitate to drop a comment below!
Happy Trading!
Arvinth Akash
Traders Academy Club Team
