The US stock market has been in a state of confusion in 2020. Volatile swings have been repeatedly tested investor’s nerves with no clear path to future stock market performance. The S&P 500 (SPX) in particular has been a source of uncertainty and speculation. While the index is currently near an all-time high, bankers have raised the possibility of a counter-trend rally. A recent analysis revealed what the charts could potentially reveal.
In the last few months, SPX has tested the support levels of the current trading range multiple times. This suggests a potential shift in the market’s sentiment as it may breach its previous resistance level and enter a new uptrend. The chart reveals that the index is currently in a holding pattern, but could breach this range in the near future.
If this were to happen, there is a high probability that SPX could enter a counter-trend rally. A counter-trend rally is when a security moves strongly in the opposite direction of its long-term trend. This is usually caused by short-term volatility.
So far, the analysis reveals that the market has been showing signs of a counter-trend rally. As such, investors should consider preparing for a potential reversal of the current market path. The index could break out of its current trading range and reach new highs, or suffer a steep retracement back to support levels.
Fortunately, investors can use various tools and strategies to identify a reversal and protect themselves from any potential losses. A stop-loss order can protect investors from sudden price swings, while chart analysis can provide greater insight into the market behavior.
The S&P 500 is currently near an all-time high, but a definitive conclusion on its future performance is yet to be seen. Bankers have suggested that a counter-trend rally could be in the works, and chart analysis reveals the possibility of a break in the current trading range. Investors should be wary of the potential risks and benefits of such a move, and use appropriate strategies to ensure their investments are protected from any potential losses.