S&P 500 index rebounded nicely from its 28 week moving average as seen in the weekly chart below. The chart pattern of the past 2 week is very similar to what happened in early April. As the index is still above its trend line with high upward momentum, we can expect the continuation of the uptrend.
Some readers have asked me about when and at what price the oil price will bottom out. Looking at the weekly chart of $WTIC, one can find that the index is still trending down will very low momentum. Usually to spot a trend reversal in the chart, we need a few things: a "W" pattern in the price movement, a positive cross over in "MACD" indicator, and "STO" climbs above the extreme over sold level of 20. A bottom is formed before the trend reversal and that's why we only know the bottom after it was formed and can not tell it "during" its formation. With the current strong plunge in $WTIC, it is likely that the index will keep falling and eventually bounces back to hit the resistance by its 28 week moving average then falls back down to the second bottom before it forms a "W". It is the second bottom in the "W" pattern that a risk tolerant investor can take advantage of. However, even if we can spot a bottom, we still do not know how strong the subsequent uptrend is.
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| Weekly chart of S&P 500 index |
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| Weekly chart of Light Crudel Oil Price |
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