Weekly Update S&P 500

Welcome to our weekly newsletter on the S&P 500. This week, the S&P 500 experienced a slight gain of 0.25%. The week kicked off with a dramatic start on Monday, where we saw a sharp 4% decline followed by a rapid 2.5% recovery, all within the same trading day. The volatility didn’t let up as the week progressed, with daily swings of 1-2% becoming the norm. Thursday brought some relief with a 3% gain, providing a temporary break from the previous days’ turbulence. Despite these fluctuations, the week ultimately closed near where it began.

Our last short position, which we placed on July 18th, has been active until July 31th, when we sold it for a gain of 1,9%
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Since the July top, the S&P 500 has experienced a decline of 6.1%. After the sharp losses in recent weeks, this week was marked by significant volatility, yet the index managed to avoid further declines. In our previous analysis, we discussed a support zone (highlighted in green on the chart) that we expected to hold. While this zone did provide support last week, the S&P 500 breached it on Monday, moving lower. Interestingly, throughout the week, the index repeatedly attempted to reclaim this green area, which has now turned into a resistance zone. This behavior mirrors what we observed in mid-July, when the S&P 500 struggled to break through the green trend line on the chart for several consecutive days, only to be followed by a sharp decline. It’s possible that we may see a similar pattern unfold, with the index potentially dropping further next week after failing to overcome the resistance this week. Given the current conditions, we remain cautious as the market situation continues to present risks. For our subscribers, it’s crucial to follow the risk management strategies we provide to protect against potential losses in case the support zones fail. We will continue to monitor the market for new opportunities and keep you updated.

The next few months

The chart shows the seasonality for the S&P 500 in an election year, indicating anticipated weakness in May, June, and July, followed by strong price increases until early September. This is then followed by a larger correction until the election in early November. From mid-June to the end of July, seasonality suggests some weakness and only moderate price rises, which we have certainly experienced with the recent decline. Now we are in August, which seasonality suggests is the strongest month of the year with an average gain of 3%. Of course, seasonality data should be taken cautiously, especially this year, as we have already seen a significant rise in prices. Investors should consider both seasonality trends and our analysis for a balanced view. Proper risk management is essential in navigating these market conditions.

Our Market Dashboard provides a quick overview of the current market conditions and, more importantly, the associated risk. You can view a chart of one of our tools, the Risk Level Indicator, showing predicted risk from 1998 to 2024. If you are interested, you can visit our Dashboard site here.

The world of finance is complex and includes many technical terms. For explanations of these terms, I recommend using the Investopedia dictionary.