SPX Falls Below Central Monthly Level as Volatility Drives Repeated Reversals
Losing the Central Monthly level for a short period like in November happens a couple of times per year, however, few weeks ago I highlighted that staying below this level for long is a concerning condition from corrections and bear markets. Currently the price for the $S&P 500(.SPX)$ and most of the securities from our watchlist is below this level.
The second chart is a zoom in of the Central Weekly Level for the same period, see the price breaching the “C” marked in green in some weeks as part of the normal price action of a bull market. Since February, the dotted area shows how volatile has been the price printing multiple invalidations or reversals during the same week.
The zoomed chart includes the Central Weekly Level AND the support and resistance levels modeled with this level and for each security; see the black horizontal lines framing well the price action, and the price crossing constantly the blue line with the green “C” that is the Central Weekly Level.
That is one of the conditions, last Wednesday I mentioned another related to volatility, the next chart shows the direct correlation of the choppy price action with specific volatility ranges, following the chart you will see the weekly levels, the monthly levels (currently more important than the weekly ones based on the analysis presented), and then the combined levels.
Meanwhile, the McClellan Oscillator remains flat in oversold territory. While the squeeze thesis stands, price weakness suggests a bullish divergence could form (much like 2023 or 2025) where price hits lower lows while the oscillator trends higher. Any bounce must recover the 50DMA.
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