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S&P 500 statistical and technical analysis

Global stock markets tumbled last week. However, we are currently seeing a recovery as many times this year. Will the price rise to the sky? The current price of S&P 500 is 4 690 (December 09, 2021). Let’s now look at statistical and technical analyzes.

Based on a long-term analysis of historical data, the average positive and negative daily returns are approximately 0.75% and -0.82% , respectively. The estimated daily return in both directions based on their probability of occurrence is 0.41% and -0.37% . Yesterday´s return was 2.07% , which is between the first and the second standard deviation. Our scoring is currently neutral (0 ) for the month-on-month change and 1 for price indexation. Both scorings range from -3 up to 3 , which means that we estimate a slightly positive phase of the cycle. The development of the estimated cycles based on our analytical system is shown in the following chart.

S&P 500 daily price indexation Source: WALFIR

Different moving averages (MAs) help us better identify trends across multiple time frames. We use 3 basic MAs to find out which sentiment dominates each horizon. The purple line represents the monthly , the green line the 6 months and the yellow line the annual moving average. According to all MAs, S&P 500 is in bullish sentiment because it is above them. In the event of a decline, monthly MA may be a support to the market price.

S&P 500 daily price development Source: WALFIR

Since the beginning of this year, we have witnessed more upward trends, with the maximum level reaching 7 consecutive days, which is also the maximum increase in the measured period. The downward trend in recent weeks have not exceeded more than 1 day. However, the maximum for the last 3 years is 6 days. We could use the average long-term ATR (Average True Range) obtained from daily data (1.05% ) to estimate Stop Loss orders for our positions. The current value is 1.94% , which is almost double the average. Approximately 90% confidence interval (return between -1.80% and 1.80% ) is shown in the histogram below by a red rectangle.

S&P 500 daily return distribution Source: WALFIR

We could use the last decile of low to high returns (2.40% ) to estimate Profit Targets, as shown in the chart below.

S&P 500 daily low to high distribution Source: WALFIR

Basic technical analysis still supports bullish sentiment as the market price creates higher highs and higher lows. The S&P 500 is currently very close to the all-time highs again after this week’s dynamic rebound. The psychological level at 4 500 was an important support along with the short-term MA. The divergence between price development and RSI also supported the bullish scenario. In addition, volumes before the rebound were very high. Therefore, the market price could set new highs this month.

S&P 500 basic technical analysis Source: TradingView

WALFIR Technologies is one of the three divisions of WALFIR s.r.o., which is based in Slovakia. The primary interests of this division are analytical, quantitative, and algorithmic...


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