S&P500 to 4500+?

Long term S&P 500

The Monthly Close Above the 261.8 Fib Extension is Significant

The month of November was a significant expression of bullishness in the markets, as the S&P500 knifed through the 261.8% Fibonacci extension with a strong monthly candle close to new all-time highs. Taking a longer term view, the technical tailwind appears to be supporting a run to 4500+ to the 461.8% extension – nearly 50% higher. It is a number that would shock those who already view the market to be in bubble territory. While many are calling for a recession or an outright market crash, this interest rate supported, debt-fueled market shows underlying technical strength, and the US market remains the strongest globally. There has also been recent follow through among small caps and micro caps. The technical picture remains bullish.

However, per the chart above, I want to point out that we are now retesting a two-decade trend line that has acted as support and resistance eight times since late 1997, and is now being tested again. I suspect we may see a bit of a pause here and a likely pullback into the 3060 zone in the coming weeks. Stocks are overbought on the daily RSI, which is encouraging long term, but likely a signal that we could see some softness before the next leg higher.
 
If you’re looking for a buy signal, a weekly close above the long term trend line should signal that the thrust to the 461.8 extension is underway. Conversely, a significant correction and monthly close below the 261.8 fib extension could indicate the November move was a false breakout. We are at a great juncture for establishing a favorable risk/reward setup right around this long term trend line and fib extension.
 
For the technicians among you, I made this chart using Trendspider, one of several trading platforms I use for my analysis. The team at Trendspider is excellent – innovative, growing, and exceedingly customer-centric. If you are interested in taking Trendspider for a spin, there is no better time than this weekend. Now through December 2nd, you can get a free seven day trial plus 40% off their annual subscription. Check it out.
 
About the author

I am the founder of fibonacci.com and an avid trader. I am also the co-founder of Texas Precious Metals, a top US precious metals company. In 2006 I was a contestant on The Apprentice with future president, Donald Trump. I live in Coeur D'Alene, Idaho, with my wife and five children, where I spend my time hiking, charting, and changing diapers.

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