Market Analysis: S&P 500 Declines in August after 5 Consecutive Months of Gains


According to statistics over the past 25 years, the average growth of the S&P 500 index is 7.8% per year. But from the beginning of 2023 to August 1, the index rose by about 19%, so a noticeable correction in size was overdue.

The decline from August 1st to the month's low was about 2/3 of the previous rise — a perfectly acceptable proportion to blow off steam from the market, which was indicated by the RSI overbought in July (while forming a divergence pattern warning that the rally has exhausted ).

An important result of the summer was that analysts in the media began to mention the recession scenario less and less – market participants believe in a “soft landing” and that the Fed is controlling the situation with high inflation, given the alarming signals from the labor market.

What will happen in autumn? Traditionally, these are months of high volatility, with the S&P 500 having chances to try to hit a new high for the year after a correction that appears to have formed in August. This is indicated by bullish facts from the chart:

→ The price of the S&P 500 has found support at the lower boundary of the parallel channel.
→ The price rebounded from the support level of 4,340.
→ The price is above significant levels 4,388 and 4,465.
→ The price has broken the bearish trend line (shown in red).
→ The price may consolidate near the median line of the channel, where supply and demand may balance each other in total before the September Fed meeting.

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