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S&P 500: 10-EMA in focus – UBS column

Review: The S&P 500 index is on a long uptrend. Since the low of 3,233 points in early November, the index has risen almost continuously. The strength behind the upward movement is underpinned by the price quotations, which are largely above the 10-EMA. The 10 EMA is of enormous importance for the short-term price development, as a look at the daily chart shows. Downward corrections in the current uptrend typically end around or slightly below the 10-EMA. As soon as the 10 EMA is broken again from the bottom to the top, a new strength signal arises and the index could be facing a new upward wave. The S&P 500 is currently trading below the 10 EMA again after the previous day’s decline.

Outlook: The upward trend in the S&P 500 is clearly intact, the current downward movement can be seen as a normal downward correction in the overall upward trend.

The long scenarios: The S&P 500 continues the price weakness from the previous day, but can already catch up in the support area around 3,610 to 3,640 points. The important long-term Fibonacci fan also runs here on the bottom of the weekly chart. As a result, the index continues its upward movement and rises above the 10-EMA again. This would generate a new strength signal and the index could take course to the high of 3,769 points. If there is a breakthrough to the top, the next target would be 3,800 points.

The short scenarios: The S&P 500 is overbought after the long run-up and could initiate a longer downward movement. But then it would be important for the bears to break through the 50 EMA on the downside. Then the lower Fibonacci fan in the weekly chart would also be broken down and new downward momentum would be generated quickly. The next target price would then be the support zone in the range of 3,550 points.

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