eResearch | The S&P 500 Index might have reached a near-term peak. For one, it is struggling to stay above its rising trend-line. For another, it has experienced a near-perfect, albeit short, “roll-over”, as we point out in Charts 2 and 3 below.
For some time we, along with countless other market pundits, have been expecting a pull-back to consolidate the extraordinary gains that have occurred since the market melt-down in March 2020. A pull-back is going to happen, but when? The trouble is that we usually do not know we are in one until it is well underway.
What should investors do? We recommend converting to defensive positions, but not abandoning stocks altogether. We suggest that subscribers take a look at our Dividend Yield Portfolio. We update it on the last Friday of each month. Sneak Preview: Although things can certainly change over the next two weeks, right now the Portfolio is well ahead of last month’s position.
Chart 1: One-Year Chart
Observation: The one-year chart above indicates that the S&P 500 is bumping along the bottom of its channel. But let us look a little more closely at the six-month chart below.
Chart 2: Six-Month Chart
Observation: The six-month chart shows that the S&P 500 is caught in a rising wedge. This is a bearish indicator. Worse, the Index is struggling to stay in the formation. There is also a perfect “roll-over” that began near the end of August and ended on September 8-9 followed by a brief consolidation to the present. Next, we will look at the one-month chart to illustrate this roll-over/consolidation.
Chart 3: One-Month Chart
Observation: The “roll-over” is very clear on the one-month chart. That was followed by a consolidation, shown by the horizontal blue line. Okay, admittedly, it is only a three-day wonder, so it cannot yet be considered significant, but it requires monitoring for whatever direction it takes next.
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