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S&P 500: 5 Rallies... and 5 Red Arrows

by Editorial Staff
Updated: September 16, 2022

Update for Monday, September 12, 2022, 4:23pm, Eastern.

220912 STU chart

Rallies in bear markets are often sharp and swift and make investors believe that the prior bullish trend is back. We’ve discussed this notion both here and in EWFF. Sometimes the upward push will end at or near top tick of the daily range. A quick glance at the countertrend rallies since the January peak in the S&P shows at least five instances of this happening, indicated by the red arrows on the chart. The final trade of these daily ranges was at or very near the high of the day, creating belief in a further market advance when in fact it was the top of the rally. Not every strong up day that closes at top tick marks the end of the rally but the end of the rally is often attended by strong up days that close at top tick. There has been nothing abnormal about the current rally from September 6 and if the final up day ends at or near top tick, we will not be surprised. But it will seem as if stocks are about to blast off, which is never a great feeling if you are bearish.

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