Wyckoff’s Spring Pattern Suggests a Temporary Market Bottom in the S&P 500
On February 24, 2022, as Russian forces launched a full-scale invasion of Ukraine, all 4 major US indices reacted negatively and fell below the previous sell-off high point support level created on January 24, 2022 during of the Globex session. At the start of the US session, the indices started to rally strongly and closed high despite the bearish sentiment and the announcement of the sanctions list against Russia.
As shown in the chart above, a Wyckoff Spring pattern appeared (annotated in the orange arrow) on February 24, 2022 when there was a temporary (intraday) break below support followed by engagement above- above. There was no downside sequel during the war between Russia and Ukraine. It pays to be careful when the market rises on bad news.
Reversal Pattern in the S&P 500 via Wyckoff Spring
The 4200-4400 demand zone has been formed since the selling high on January 24, 2022. This can be confirmed by the stop action as reflected in the S&P 500 (SPX) over the past 4 trading sessions. negotiation. Wyckoff’s spring action on February 24, 2022 is the biggest hint of a reversal sign, which was confirmed by the bullish momentum bar the next day.
Now the S&P 500 is reaching the axis line (around 4380-4400) where support turned resistance should attract supply. A pullback could be expected as a test of the Wyckoff spring before further pursuit towards the next bullish target of 4450-4600. Recoil characteristics and volume are crucial in determining the quality of the next rally. Refer to the Wyckoff Method video for details on interpreting price action and volume to predict market movement.
Failure of the reversal pattern in the S&P 500
Some pattern traders might argue that this is a potential double bottom, which could mark the bottom of the market (eg, the low). However, judging by the health of the overall stock market, there is likely to be a final wave of declines like 2014, 2015 and 2018 to set the market bottom as seen in the market scope video . Based on the Wyckoff phase analysis, the S&P 500 is likely at the start of phase B where volatility is still excessive on both sides, as shown below:
The sign of weakness started in November 2021 until the high point of selling formed on January 24, 2022 draws a bearish background in the S&P 500. Therefore, the Wyckoff spring may not be extremely bullish to launch a new uptrend. The characteristics of price and volume when trying to rally will provide us with plenty of clues to anticipate future price action.
The key resistance levels for the S&P 500 are 4400, 4480, and 4600. It is crucial to pay attention to how price interacts with key levels and the level of supply, as evidenced by volume. If the support near 4200 does not hold, we can expect a quick drop.
Despite the bearish sentiment in the stock market, the The Wyckoff spring, as the indices show, signals a recovery at least for now. There are also more buy signals (295) than sell signals (79) as shown in my stock screener. Refer to the screenshot below: