The stock market was pretty much in correction from August till the end of October. However, November has erased all the losses pretty much retracing 100% back. This rally was quite quick and thus, we shall expect a short-term pullback before going up again.
The price hit its current resistance level around 4600 and now is going sideways. As the November increase was quick, the market got overbought and now simply needs a pause. The overbought levels are also supported by RSI and MACD indicators. It is also important to watch the 5 biggest companies in the S&P500 which are listed in the bottom part of the chart. While AMZN and AAPL are still holding the price sideways, the GOOG, META, and MSFT are sloping down, looking for their support level.
So where the price will pull before it goes up again? Perhaps only to its 20 EMA, however, the most likely level is in the area of blue shaded rectangle that is represented by a gap up during the increase in November and which is also supported by the Fibonacci retracement indicator. \
In the long term, we are in a bull market and as soon the price pierces through the red resistance, it will then aim for the next orange resistance level around 4800. Note the VIX (stock market’s expectation of volatility based on S&P 500 index options) went to its lowest levels in years, which gives confidence to traders to go long.
In conclusion, we are in a bull market maybe soon to experience a Santa Claus rally and then a trendy bull market in 2024. However, this will depend on inflation and other macroeconomic indicators. FED is promising lower inflation, so let’s see how we can play the cards in our trading favor.