Confirmation Of This Price Volume Pattern in S&P 500 Could Point To A Strong Rally Ahead

S&P 500 had a strong rally off the swing low on 20 May 2022, which was considered as a Wyckoff change of character, to stop the down trend initiated from April 2022. Whether the current rally would mark the low in May 2022 as the market bottom, there has been a dispute among the analysts and economists as shown in the news.

Hence a detailed study and explanation based on the Wyckoff trading method and the market breadth on how to confirm the market bottom were presented in the video at the bottom of this post to help traders and investors to make a better decision based on the current market dynamics.

Spotting Signal For Bullish Continuation in S&P 500

Last week S&P 500 reacted off the supply zone with increasing volume suggested presence of supply. This is the key difference between the current rally and the rally in March 2022. Refer to the chart below.

In March 2022, the smooth rally was of ease of movement as reflected in the low volume suggested minimal presence of supply.

The current rally attracted supply on 31 May and 1 June 2022 as the overall market sentiment is still bearish. However, the shallow pullback between 4070-4200 with decreasing volume (annotated in orange arrow) could be a sign of potential supply absorption. Although aggressive demand was not present, S&P 500 could be ready to move up when the selling momentum is exhausted.

Should S&P 500 continue to consolidate within 4070-4200 with low volume (annotated in green), it is expected to break above 4200 and to challenge the next resistance and supply zone between 4300-4400 (annotated in pink lines) as the first price target.

Higher targets are available as there is enough causality built in the past month based on Point and Figure chart below.

For bullish case, which is currently unfolding, a price target of 4470 (annotated in green), which coincides with the previous resistance is available followed by 4610-4890 (annotated in orange) based on the Point and Figure price target projection.

The Point and Figure chart suggests there is enough fuel in the tank for S&P 500 to even hit all time high level. Despite the current bearish sentiment, one should not be surprise if S&P 500 is heading to a strong rally when the supply absorption is completed.

A failure below 4050 with spike of volume will violate the short-term bullish case for S&P 500.

Confirming The Market Bottom With Wyckoff Method

It is essential for a trader to seize the right opportunity to trade with the market direction while looking for signs for potential market bottom or failure. Watch the video below to find out how to use Wyckoff method together with the stock market breadth to spot and confirm the market bottom.

The short-term direction of S&P 500 is still up until proven otherwise. While riding on this up wave, tell-tale signs will be manifested along the way. It is up to individual to interpret the messages from the market to make the right trading and investing decision. Visit TradePrecise.com to get more stock market insights in email for free.